Magix Productions orders new equipment for the company. The new equipment costs $50,000 and will help the company save $10,000 annually. What is the average rate of return of the equipment?
A) 15 percent
B) 20 percent
C) 35 percent
D) 40 percent

Question

Quizplus · Accepted Answer

To calculate the average rate of return, divide the annual savings by the cost of the equipment and multiply by 100 percent. 
($10,000 annual savings / $50,000 cost of equipment) x 100% = 20%.
Therefore, the average rate of return of the equipment is 20 percent. Choice B is the best choice.

Magix Productions Orders New Equipment for the Company