Question
United, Inc., is considering a capitala budgeting project that would have an eight year life and would require a $1,000,000 investment in equipment. Current equipment
United, Inc., is considering a capitala budgeting project that would have an eight year life and would require a $1,000,000 investment in equipment. Current equipment could be salvaged now for $300,000. This project would also require $100,000 of new working capital. At the end of ten years, the project would terminate and the new equipment would have $150,000 salvage value. The project has the following additional financial data:
Annual Sales $600,000 Annual Net Operating Income $112,000 Annual Depreciation $106,250 Required Rate of Return 12%
What is the simple rate of return for this project (nearest %)
United, Inc., is considering a capitala budgeting project that would have an eight year life and would require a $1,000,000 investment in equipment. Current equipment could be salvaged now for $300,000. This project would also require $100,000 of new working capital. At the end of ten years, the project would terminate and the new equipment would have $150,000 salvage value. The project has the following additional financial data:
| Annual Sales | $600,000 |
| Annual Net Operating Income | $112,000 |
| Annual Depreciation | $106,250 |
| Required Rate of Return | 12% |
What is the simple rate of return for this project (nearest %)
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Managerial Accounting
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
12th Edition
9780073526706
