Answer:
18.75%
Explanation:
Calculation to determine what The simple rate of return would be closest to:
First step is to calculate the Depreciation using this formula
Depreciation = (Cost - Salvage value)/ life
Let plug in the formula
Depreciation= ($50,000-$5000)/8 years
Depreciation=$40,000/8
Depreciation=$5,625
Second step is to calculate the annual net cash savings:
Annual cash savings $15,000
Less: Depreciation ($5,625)
(45,000/8 = $5,625)
Annual net cash savings $ 9,375
($15,000-$5,625)
Now let calculate the Simple rate of return
Using this formula
Simple rate of return = Annual net cash savings / Initial investment
Let plug in the formula
Simple rate of return= $9,375/$50,000
Simple rate of return= 18.75%
Therefore The simple rate of return would be closest to:18.75%
