Slomkowski Corporation is contemplating purchasing equipment that would increase sales revenues by $298,000 per year and cash operating expenses by $143,000 per year. The equipment would cost $712,000 and have a 8 year life with no salvage value. The annual depreciation would be $89,000. The simple rate of return on the investment is closest to (Ignore income taxes.):

Question

Quizplus · Accepted Answer

11eacbfc_c61e_dd56_8ffe_39c5b04813c5_TB7552_00 Simple rate of return = Annual incremental net operating income ÷ Initial investment
= $66,000 ÷ $712,000 = 9.3% (rounded)

Slomkowski Corporation Is Contemplating Purchasing Equipment That Would Increase Sales