What the annual rate of return expected on this equipment is

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A company is considering purchasing factory equipment that costs $480000 and is estimated to have no salvage value at the end of its 8-year useful life. If the equipment is purchased, annual revenues are expected to be $231000 and annual operating expenses exclusive of depreciation expense are expected to be $39000. The straight-line method of depreciation would be used.

Problem 1: If the equipment is purchased, the annual rate of return expected on this equipment is

Option 1: 55.0%.
Option 2: 27.5%.
Option 3: 40.0%.
Option 4: 80.0%.

Reference no: EM132773556

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