Assume a machine that has a useful life of only one year costs $2,000. Assume, also, that net of such operating costs as power, taxes, and so forth, the additional revenue from the output of this machine is
Expected to be $2,300. The expected rate of return on this machine is
A) 7.5 percent.
B) 10 percent.
C) 15 percent.
D) 20 percent.

Question

Quizplus · Accepted Answer

The expected rate of return is calculated by taking the expected net profit ($2,300 - $2,000 = $300) and dividing it by the initial cost ($2,000), then multiplying by 100 to get a percentage. So, $300 / $2,000 * 100 = 15%.

Assume a Machine That Has a Useful Life of Only