The Boyer Bank wants to add a new ATM machine in a busy mall.It knows the new machine will cost $60,000 and another $30,000 is required to install it in the mall.It expects to save $0.27 per transaction and generate 100,000 transactions per year.Also,it expects the new machine to last 8 years.What is the expected rate of return or internal rate or return of this project?
A)25%
B)3.3%
C)30%
D)12%
E)2.4%

Question

Quizplus · Accepted Answer

The expected rate of return is 25%. This is calculated by dividing the annual savings ($27,000) by the initial investment ($90,000) and multiplying by 100.

The Boyer Bank Wants to Add a New ATM Machine