A mass-production bagel factory is considering the purchase of a flash freezer to improve the quality of the raw dough it provides supermarket bakeries.The freezer costs $750,000 and would increase business revenues by $48,000 a year after all expenses besides interest are paid.If the interest rate is 7.8 percent,what is the freezer's annual profit rate?
A)7.8 percent.
B)1.4 percent.
C)-1.4 percent.
D)5.9 percent.
E)-5.9 percent.

Question

Quizplus · Accepted Answer

The annual profit rate is calculated by subtracting the interest cost from the revenue increase and dividing by the cost of the freezer. The interest cost is $750,000 * 7.8% = $58,500. The revenue increase is $48,000, so the profit is $48,000 - $58,500 = -$10,500. The profit rate is -$10,500 / $750,000 = -1.4%.

A Mass-Production Bagel Factory Is Considering the Purchase of a Flash