Cardinal Company is considering a project that would require a $2,975,000 invest
ID: 2381164 • Letter: C
Question
Cardinal Company is considering a project that would require a $2,975,000 investment in equipment with a useful life of five years. At the end of five years, the project would terminate and the equipment would be sold for its salvage value of $300,000. The company
Cardinal Company is considering a project that would require a $2,975,000 investment in equipment with a useful life of five years. At the end of five years, the project would terminate and the equipment would be sold for its salvage value of $300,000. The company
Explanation / Answer
Hi,
Please find the answer as follows:
Simple Rate of Return = Net Operating Income/Initial Investment*100 = 465000/2975000*100 = 15.63%
Simple rate of return would be 15.63% fo each of the 5 Years as NOI is assumed to be constant.
Thanks.