(Ignore income taxes in this problem.) The Crawford Company is pondering an investment in a machine that costs $350,000, that will have a useful life of eight years, and that will have a salvage value of $25,000. If this machine is purchased, a similar, old machine will be sold at a salvage value of $40,000. The anticipated yearly revenues and expenses associated with the new machine are: All of the revenues and expenses except depreciation are for cash. The company's required rate of return is 12%. The annual cash flows occur uniformly throughout the year.
-The simple rate of return,to the nearest tenth of a percent,of this investment is:

Question

(Ignore income taxes in this problem.) The Crawford Company is pondering an investment in a machine that costs $350,000, that will have a useful life of eight years, and that will have a salvage value of $25,000. If this machine is purchased, a similar, old machine will be sold at a salvage value of $40,000. The anticipated yearly revenues and expenses associated with the new machine are:  All of the revenues and expenses except depreciation are for cash. The company's required rate of return is 12%. The annual cash flows occur uniformly throughout the year. 
-The simple rate of return,to the nearest tenth of a percent,of this investment is:

Quizplus · Accepted Answer

Simple rate of return = Annual incremental net operating income F1F1F1S1F1F1F10 Initial investment
= $56,375 F1F1F1S1F1F1F10 $310,000 = 18.2%

(Ignore Income Taxes in This Problem