Ignore income taxes in this problem.) Purvell Company has just acquired a new ma
ID: 2386518 • Letter: I
Question
Ignore income taxes in this problem.) Purvell Company has just acquired a new machine. Data on the machine follow:Purchase cost
$50,000
Annual cost savings
$15,000
Life of the machine
8 years
The company uses straight-line depreciation and a $5,000 salvage value. (The company considers salvage value in making depreciation deductions.) Assume cash flows occur uniformly throughout a year.
The simple rate of return would be closest to
A. 12.5%.
B. 30.0%.
C. 18.75%.
D. 17.5%.
***Please SHOW HOW to get this!
Explanation / Answer
c