Mussina Company had an investment which cost $260,000 and had a salvage value at the end of its useful life of zero. If Mussina's expected annual net income is $15,000, the annual rate of return is:

Question

Quizplus · Accepted Answer

The annual rate of return is calculated by dividing the expected annual net income by the initial investment cost. So, $15,000 / $260,000 = 0.0577 or 5.77%, which is approximately 11.5%.

Mussina Company Had an Investment Which Cost $260,000 and Had