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If the annual marginal benefit from the computers can be expected to continue throughout the foreseeable future, we can calculate the annual marginal return on

If the annual marginal benefit from the computers can be expected to continue throughout the foreseeable future, we can calculate the annual marginal return on each additional computer. In this instance, marginal return means the percent return on investment the firm gets for an additional computer.

For example, suppose each computer bought will cost the company $1,000. Then the annual marginal return on the first computer is $300 / $1,000 = 30%. That is, each year the computer is in use, it provides an annual benefit worth 30% of its purchase price. Calculate the marginal return of each computer below.

Computers

Annual Total

Annual

Benefit (Dollars)

Marginal Return

0 0 -
1 300 30.0%
2 500 ?
3 625 ?
4 700 ?
5 750 ?

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