What is the simple rate of return on this investment

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Reference no: EM133269812

Case: The management of Polymer Corporation, a plastics manufacturer, is considering the purchase of machinery that would cost $450,000 and have no salvage value at the end of its 15 year useful life. The company estimates the following annual costs and revenues associated with the machine:

Revenues $250,000

Expenses:

Maintenance $40,000

Depreciation $30,000

Insurance $30,000

Salary $130,000

Total Expenses $230,000

Required: If the company will not purchase the machinery unless it provides a payback period of six years or less should the purchase be made? What is the simple rate of return on this investment?

Reference no: EM133269812

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