A Company Projects an Increase in Net Income of $40,000

question 75

Multiple Choice

A company projects an increase in net income of $40,000 each year for the next five years if it invests $500,000 in new equipment.The equipment has a five-year life and an estimated salvage value of $50,000.The company uses the straight-line method of depreciation.What is the annual rate of return?

• A)8%
• B)14.5%
• C)18%
• D)26.7%

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Definitions:

Convenience Goods

Consumer items that are widely available and can be bought frequently and with minimal effort, such as everyday household items.

Personal Computers

Electronic devices designed for individual use, capable of executing a set of instructions or software.

Product Mix

The total range of products that a company offers to sell, including variations of products based on size, color, or other attributes.

Breadth

The range or variety of products or services offered by a company or available within a market.