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6 December, 19:43

Cullumber Company is considering buying equipment for $220000 with a useful life of 5 years and an estimated salvage value of $6000. If annual expected income is $28000, the denominator in computing the annual rate of return is $226000. $110000. $113000. $220000.

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  1. 6 December, 19:57
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    Average investment (denominator) = $113,000

    Explanation:

    Annual rate of return is the average annual income as a percentage of average investment. It is the proportion of the average investment that is earned, on the average, as annual income.

    Annual rate of return = annual net income / average investment

    Average investment = (Initial, cost + scrap value) / 2

    Average investment = (220,000 + 6,000) / 2 = $113,000

    Average investment (denominator) = $113,000
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Home » Business » Cullumber Company is considering buying equipment for $220000 with a useful life of 5 years and an estimated salvage value of $6000. If annual expected income is $28000, the denominator in computing the annual rate of return is $226000. $110000.
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