Use the Following Information for Questions

question 120

Multiple Choice

Use the following information for questions
A company is considering purchasing factory equipment that costs $480,000 and is estimated to have no salvage value at the end of its 8-year useful life. If the equipment is purchased, annual revenues are expected to be $135,000 and annual operating expenses exclusive of depreciation expense are expected to be $39,000. The straight-line method of depreciation would be used.
-If the equipment is purchased, the annual rate of return expected on this equipment is

• A) 40.0%.
• B) 7.5%.
• C) 15.0%.
• D) 20.0%.

---

Definitions:

Multiple-step

An income statement format that shows several steps to determine net income, including gross profit, operating income, and other income and expenses.

Balance Sheet

A financial statement that shows a company's assets, liabilities, and shareholders' equity at a specific point in time.

Income Statement

A financial report that shows a company's revenues, expenses, and net income over a specific period.

Authorized

Authorized typically refers to something that has been officially approved or given permission by a relevant authority or governing body.