Physician's Pharmacy is considering the purchase of a copying machine, which it will make available to customers at a per-copy charge. The copying machine has an initial cost of $7,500, an estimated useful life of five years, and an estimated salvage value of $500. The estimated annual revenue and expenses relating to operation of the machine are as follows:
All revenue will be received in cash; expenses other than depreciation will be paid in cash. Depreciation will be computed by the straight-line method.If you select answer d, indicate the correct amount.
-Refer to the above data. The expected rate of return on average investment is:

Question

Physician's Pharmacy is considering the purchase of a copying machine, which it will make available to customers at a per-copy charge. The copying machine has an initial cost of $7,500, an estimated useful life of five years, and an estimated salvage value of $500. The estimated annual revenue and expenses relating to operation of the machine are as follows:
  All revenue will be received in cash; expenses other than depreciation will be paid in cash. Depreciation will be computed by the straight-line method.If you select answer d, indicate the correct amount.
-Refer to the above data. The expected rate of return on average investment is:

Quizplus · Accepted Answer

$1,100/ [($7,500 + $500)/2] = 27.5%

Physician's Pharmacy Is Considering the Purchase of a Copying Machine