Determine the average rate of return

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Problem - Capital Investment Analysis Not Using Present Value - Tyme Manufacturing Inc. is evaluating a capital investment proposal for a new machine. The new machine has a cost of $230,000, an expected useful life of six years, and a residual value of $20,000. Information on expected annual revenues and expenses associated with the machine is as follows:

Revenue from machine $125,000

Expenses of machine, other than depreciation 75,000

Depreciation expense 35,000

All revenues and expenses are in cash, except for depreciation expense.

Required -

a. Determine the average rate of return?

b. Determine the cash payback period?

Reference no: EM132767677

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