The Jackson Company has invested in a machine that cost $90,000, that has a usef
ID: 2381274 • Letter: T
Question
The Jackson Company has invested in a machine that cost $90,000, that has a useful life of nine years, and that has no salvage value at the end of its useful life. The machine is being depreciated by the straight-line method, based on its useful life. It will have a payback period of five years. Given these data, the simple rate of return on the machine is closest to: (Ignore income taxes.) (Round your answer to 1 decimal place.)
The Jackson Company has invested in a machine that cost $90,000, that has a useful life of nine years, and that has no salvage value at the end of its useful life. The machine is being depreciated by the straight-line method, based on its useful life. It will have a payback period of five years. Given these data, the simple rate of return on the machine is closest to: (Ignore income taxes.) (Round your answer to 1 decimal place.)
Explanation / Answer
annual net cash inflow = 90000/5 = 18000
annual depriciation = 90000/9 = 10000
annual incremental NI = 18000 - 10000 = 8000
simple rate of return = 8000/90000 = 8.9%
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