$$\text { Reference: } 10 - 10$$ Fast Food, Inc. has purchased a new donut maker. It cost $16,000 and has an estimated life of 10 years with no salvage value. The following annual donut sales and expenses are projected: $$\begin{array} { | l | r | l | }
\hline \text { Sales } & & \$ 22,000 \
\hline \text { Expenses: } & & \
\hline \text { Flour, etc., required in making donuts } & \$ 10,000 & \
\hline \text { Salaries } & 6,000 & \
\hline \text { Depreciation } & 1,600 & 17,600 \
\hline \text { Net income } & & \$ 4,400 \
\hline
\end{array}$$
-The simple rate of return for the new machine is closest to:

Question

$$\text { Reference: } 10 - 10$$ Fast Food, Inc. has purchased a new donut maker. It cost $16,000 and has an estimated life of 10 years with no salvage value. The following annual donut sales and expenses are projected: $$\begin{array} { | l | r | l | } 
\hline \text { Sales } & & \$ 22,000 \
\hline \text { Expenses: } & & \
\hline \text { Flour, etc., required in making donuts } & \$ 10,000 & \
\hline \text { Salaries } & 6,000 & \
\hline \text { Depreciation } & 1,600 & 17,600 \
\hline \text { Net income } & & \$ 4,400 \
\hline
\end{array}$$
-The simple rate of return for the new machine is closest to:

Quizplus · Accepted Answer

The simple rate of return is calculated by dividing the annual net income by the initial investment. In this case, the annual net income is $4,400 and the initial investment is $16,000. Therefore, the simple rate of return is $4,400/$16,000 = 27.5%.

Reference: 10−10\text { Reference: } 10 - 10 Reference: 10−10 Fast Food, Inc

$\text { Reference: } 10 - 10$ Fast Food, Inc