Assume that a company is considering purchasing a new piece of equipment for $240,000 that would have a useful life of 10 years and no salvage value. The new equipment would cost $20,000 per year to operate and it would replace an old piece of equipment that costs $56,500 per year to operate. The old equipment currently being used could be sold for a salvage value of $40,000. The simple rate of return for the new equipment is closest to:

Multiple Choice

• 20.00%.

• 12.00%.

• 7.08%.

• 6.25%.