Alter company's manager has proposed installing an equipment that will cost $36,000, have a B-year life, and have no salvage value. The company estimates that the machine could produce 4000 units which can be sold evenly throughout the year. The expected income through the life of machinery is $16,000. The machine will generate net cash flows per year of $8,000. Calculate the average rate of return on the investment. a. 44.44% b. 22.22% с. 33.33% d. 11.11%

Alter company's manager has proposed installing an equipment that will cost $36,000, have a B-year life, and have no salvage value. The company estimates that the machine could produce 4000 units which can be sold evenly throughout the year. The expected income through the life of machinery is $16,000. The machine will generate net cash flows per year of $8,000. Calculate the average rate of return on the investment. a. 44.44% b. 22.22% с. 33.33% d. 11.11%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

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Alter company's manager has proposed installing an equipment that will cost $36,000, have a
8-year life, and have no salvage value. The company estimates that the machine could produce
4000 units which can be sold evenly throughout the year. The expected income through the life
of machinery is $16,000. The machine will generate net cash flows per year of $8,000.
Calculate the average rate of return on the investment.
a. 44.44%
b. 22.22%
с. 33.33%
d. 11.11%

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