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)7.5 percent.
B)10 percent.
C)15 percent.
D)20 percent.

Question

Quizplus · Accepted Answer

The expected rate of return is calculated by taking the additional revenue ($2,300) minus the cost of the machine ($2,000), divided by the cost of the machine ($2,000). This gives ($2,300 - $2,000) / $2,000 = $300 / $2,000 = 0.15 or 15 percent.

Assume a Machine That Has a Useful Life of Only