(Ignore income taxes in this problem.)The management of Plotnik Corporation is investigating purchasing equipment that would increase sales revenues by $269,000 per year and cash operating expenses by $156,000 per year.The equipment would cost $294,000 and have a 6 year life with no salvage value.The simple rate of return on the investment is closest to:

Question

Quizplus · Accepted Answer

11ea7761_15bd_baa8_81a5_95b7d03a1b20_TB2580_00 Simple rate of return = Annual incremental net operating income ÷ Initial investment
= $64,000 ÷ $294,000 = 21.8% (rounded)

(Ignore Income Taxes in This Problem