The Halsey Corporation Is Contemplating the Purchase of New Equipment

question 2

Multiple Choice

The Halsey Corporation is contemplating the purchase of new equipment that would require an initial investment of $125,000.The equipment would have a useful life of six years,with a salvage value of $29,000.This new equipment would be depreciated over its useful life by the straight-line method.It would replace existing equipment which is fully depreciated.The existing equipment has a salvage value now of $38,000.The anticipated annual revenues and expenses associated with the new equipment are: Assume cash flows occur uniformly throughout a year except for the initial investment and the salvage value at the end of the project. For this investment,the simple rate of return to the nearest tenth of a percent is:

• A)43.7%
• B)25.3%
• C)30.4%
• D)17.6%

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