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kotegsom [21]
3 years ago
6

Swift Oil Company is considering investing in a new oil well. It is expected that the oil well will increase annual revenues by

$140,000 and will increase annual expenses by $88,000 including depreciation. The oil well will cost $465,000 and will have a $10,000 salvage value at the end of its 10-year useful life. Calculate the annual rate of return. (Round answer to 2 decimal places, e.g. 12.47.)
Business
1 answer:
Alexeev081 [22]3 years ago
4 0

Answer: Annual rate of return = 21.89%

Explanation:

Given that,

Expected increase in annual revenues by = $140000

Expected increase in annual expenses by =  $88,000 including depreciation

Cost of oil well = $465,000

salvage value at the end of its 10-year useful life = $10,000

Expected Income = Expected increase in annual revenues - Expected increase in annual expenses

= 140000 - 88000

=$52000

Average investment = \frac{465000+10000}{2}

= $237500

Annual rate of return = \frac{Expected\ Annual\ Income}{Average\ Investment}

= \frac{52000}{237500}

= 21.89%

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We simply applied the above formula so that the correct value could come

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2 years ago
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4 0
3 years ago
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A receipt showing that an investor has made an interest-bearing loan to a bank is a.
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A savings account known as a certificate of deposit (CD) holds a fixed sum of money for a predetermined length of time, such as six months, a year, or five years. One of the most crucial factors is the certificate of deposit's maturity period.

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4 0
1 year ago
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olchik [2.2K]

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An industry that has many companies offering the same basic product, but with some slight difference is
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