We can solve
this problem by first calculating the annual net cash inflow. This can be
solved by remembering that:
Payback period
= Initial investment<span> / Annual net
cash inflow</span>
<span>
6 years = $75,000
/ Annual net
cash inflow
<span>
Therefore,
Annual net
cash inflow = $12,500
Next, we
calculate for the cost. The cost we will consider here is the depreciation
value of the machine.
Annual depreciation
= $75,000 / 15 years = $5,000
Therefore the annual net operating income is:
Annual net operating income = $12,500 - $5,000 = $7,500
Simple rate of
return is calculated by:
Simple rate of
return = Annual net operating income / Initial
investment
Simple rate of
return = $7,500 / <span>
$75,000 = 0.1 = 10%</span></span></span>
The answer is f hope this helps
Step-by-step explanation:
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