Compute the simple rate of return on purchase

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Solve the following problems pertaining to capital-investment analysis.

a. The K. Wilson Company must purchase a new Xerox machine for her expanding business at the price of $16,000 and they estimate a net profit before depreciation of $2,500.  Compute the payback period.

b. Mr. Smith just purchased a "super duper" Caterpillar for $110,000. The average net income is $20,000 and average depreciation is $10,000. Compute the simple rate of return on this purchase.

Reference no: EM13219637

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