b) Exercise 2: What is the Unadjusted Rate of Return? Express your answer as a %. Round your answer to one place beyond the decimal place. See circle on the printed exercise.

EXERCISE 2: Minx Company purchases a piece of equipment for $36,000. The equipment has an expected useful life of 8 years and no salvage value. The equipment is expected to produce new revenue for the company in the amount of $10,000 per year. Calculate the Unadjusted Rate of Return using the following formula:

EXERCISE 2: Minx Company purchases a piece of equipment for $36,000. The equipment has an expected useful life of 8 years and no salvage value. The equipment is expected to produce new revenue for the company in the amount of $10,000 per year. Calculate the Unadjusted Rate of Return using the following formula: Unadjusted Rate of Return = Average Increase Net Income / Average Cost of Investment Start by calculating the annual average Net Income (numerator): Annual Revenue LESS: Depreciation per year EQUALS: Annual Net Income Next, calculate the Average Cost of Investment (denominator): Subtotal Divide by: 2 2 Average Amount Invested Now, calculate the Unadjusted Rate of Return: Annual Net Income (from above) Divide by: Average Amount Invested (from above) Equals Unadjusted Rate of Return (round to one place past the decimal and express answer as a percent) % Net Present Value (NPV): Uses time value of money techniques to evaluate the viability of a project