Ask Question
28 December, 01:30

The management at Dime Corporation is investigating purchasing equipment that would increase sales revenues by $527,000 per year and cash operating expenses by $339,800 per year. The equipment would cost $425,000 and have a 10 year life with no salvage value. Dime Corporation uses straight-line depreciation for all fixed assets. The simple rate of return on the investment is closest to (ignore income taxes) : A. 44.05% B. 54.05% C. 27.46% D. 34.05%

+4
Answers (1)
  1. 28 December, 02:19
    0
    option (D) : 34.05%

    Explanation:

    As per the data given in the question,

    Computation of Simple rate of return:

    Investment = $425,000

    Depreciation = (Initial cost - salvage value) : useful life

    = ($425,000 - 0) : 10

    = $42,500

    Net profit = Sales revenue - cash operating expense - Depreciation

    = $527,000-$339,800-$42,500

    = $144,700

    Simple rate of return = Net Profit : Investment

    = $144,700 : $425,000

    = 34.05%

    Hence, option (D) is correct answer
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “The management at Dime Corporation is investigating purchasing equipment that would increase sales revenues by $527,000 per year and cash ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers