Academic Integrity: tutoring, explanations, and feedback — we don’t complete graded work or submit on a student’s behalf.

Wayne Company is considering a long-term investment project called ZIP. ZIP will

ID: 2471823 • Letter: W

Question

Wayne Company is considering a long-term investment project called ZIP. ZIP will require an investment of $121,120. It will have a useful life of 4 years and no salvage value. Annual revenues would increase by $80,400, and annual expenses (excluding depreciation) would increase by $40,700. Wayne uses the straight-line method to compute depreciation expense. The company’s required rate of return is 13%.

Compute the annual rate of return. (Round answer to 0 decimal places, e.g. 15%.)

Annual rate of return % ?

Explanation / Answer

Answer:

Annual rate of Return=(Annual net income/Average Investment)*100

=(9420/(121120/2))*100

=(9420/60560)*100

=16%

Particulars Amount ($) Revenue 80400 Less: Expenses (Excluding dep) 40700 Dep 30280 Annual Net income 9420