The Company Uses Straight-Line Depreciation on All Equipment

question 164

Multiple Choice

$\begin{array}{l}\text { Oriental Company has gathered the following data on a proposed investment project: }\\\begin{array} { | l | r | } \hline \text { Investement in Depreciable Equipment } & \$ 200,000 \\\hline\end{array}\end{array}$
$\begin{array}{|l|r|}\hline \text { Annual Net Cash Flows } & \$ 50,000 \\\hline \text { Life of the Equipment } & 10 \text { years } \\\hline \text { Salvage Value } & -0- \\\hline \text { Discount Rate } & 10 \%\\\hline\end{array}$
The company uses straight-line depreciation on all equipment. (Ignore income taxes in this problem.)
-What would be the simple rate of return on the investment?

• A) 10%.
• B) 15%.
• C) 25%.
• D) 35%.

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