Wayne Company is considering a long-term investment project called ZIP. ZIP will
ID: 2471823 • Letter: W
Question
Wayne Company is considering a long-term investment project called ZIP. ZIP will require an investment of $121,120. It will have a useful life of 4 years and no salvage value. Annual revenues would increase by $80,400, and annual expenses (excluding depreciation) would increase by $40,700. Wayne uses the straight-line method to compute depreciation expense. The company’s required rate of return is 13%.
Compute the annual rate of return. (Round answer to 0 decimal places, e.g. 15%.)
Annual rate of return % ?
Explanation / Answer
Answer:
Annual rate of Return=(Annual net income/Average Investment)*100
=(9420/(121120/2))*100
=(9420/60560)*100
=16%
Particulars Amount ($) Revenue 80400 Less: Expenses (Excluding dep) 40700 Dep 30280 Annual Net income 9420Related Questions
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