The management of Nixon Corporation is investigating purchasing equipment that would cost $540,000 and have a 7 year life with no salvage value. The equipment would allow an expansion of capacity that would increase sales revenues by $375,000 per year and cash operating expenses by $216,500 per year. (Ignore income taxes.) Required: Determine the simple rate of return on the investment.

The management of Nixon Corporation is investigating purchasing equipment that would cost $540,000 and have a 7 year life with no salvage value. The equipment would allow an expansion of capacity that would increase sales revenues by $375,000 per year and cash operating expenses by $216,500 per year. (Ignore income taxes.) Required: Determine the simple rate of return on the investment.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 10E: Roberts Company is considering an investment in equipment that is capable of producing more...

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