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inn [45]
3 years ago
6

A company projects an increase in net income of $135,000 each year for the next five years if it invests $900,000 in new equipme

nt. The equipment has a five-year life and an estimated salvage value of $300,000. What is the annual rate of return on this investment
Business
1 answer:
Ksivusya [100]3 years ago
6 0

Answer:

the annual rate of return is 22.50%

Explanation:

The computation of the annual rate of return is shown below:

Average investment is

= ($900,000 + $300,000) ÷ 2

= $600,000

Now

Annual rate of return is

= Annual net income ÷ Average investment

= $135,000 ÷ $600,000

= 22.50%

hence, the annual rate of return is 22.50%

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