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Compute the Unadjusted Rate of Return

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Question - A hospital is trying to determine the payback period for a piece of X-Ray equipment it is purchasing. The assumptions are:

-Purchase price of equipment = $350,000.

-Useful life of the equipment = 10 years.

-Revenue the machine will generate per year = $10,000.

-Direct operating costs associated with earning revenue = $75,000

-Depreciation expense per year = $15,000.

- Given the following assumptions, compute the Unadjusted Rate of Return using BOTH the original investment amount and the average investment amount.

-Average Annual Net Income is $ 400,000

-Original Investment Amount is $ 1,200,000

-Unrecovered Asset Cost at the end Of the useful life = $ 200,000

Reference no: EM133058273

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