Question

Assume a machine that has a useful life of only one year costs $2,000. Assume, also, that net of such operating costs as power, taxes, and so forth, the additional revenue from the output of this machine is expected to be $2,300. The expected rate of return on this machine is:
A. 20 percent.
B. 7.5 percent.
C. 10 percent.
D. 15 percent

Answer 1

Answer:

D. 15 percent

Explanation:

Cost of the machine =  $2,000

Having considered operating costs as power, taxes, and so forth, the additional revenue from the output of this machine is expected to be $2,300

Expected return = $2,300 -  $2,000

                           =  $300

Therefore, the rate of returns

= Returns/cost

=300/2000

= 0.15

In Percentage, 15%. The expected rate of return on this machine is 15%