The Jackson Company has invested in a machine that cost $56,000, that has a usef
ID: 2536139 • Letter: T
Question
The Jackson Company has invested in a machine that cost $56,000, that has a useful life of ten years, and that has no salvage value at the end of its useful life. The machine is being depreciated by the straight-line method, based on its useful life. It will have a payback period of seven years. Given these data, the simple rate of return on the machine is closest to: (Ignore income taxes in this problem.) (Round your answer to 1 decimal place.)
The Jackson Company has invested in a machine that cost $56,000, that has a useful life of ten years, and that has no salvage value at the end of its useful life. The machine is being depreciated by the straight-line method, based on its useful life. It will have a payback period of seven years. Given these data, the simple rate of return on the machine is closest to: (Ignore income taxes in this problem.) (Round your answer to 1 decimal place.)
Explanation / Answer
Annual net cash flows = 56000/7 = $8000 Annual net income = 8000-(56000/10)= $2400 Simple rate of return = 2400/56000= 4.3%
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