Question

suppose that a new machine tool having a useful life of only one year costs $80,000. suppose, also, that the net additional revenue resulting from buying this tool is expected to be $96,000. the expected rate of return on this tool is: multiple choice 2 percent. 20 percent. 80 percent. 8 percent.

Answer 1

To find the expected rate of return on the new machine tool, subtract the cost from the additional revenue to get the net profit. Next, divide this net profit by the cost and multiply by 100 to get the percentage. The expected rate of return on the tool is 20 percent.

Step-by-step explanation:

The expected rate of return on this new machine tool is calculated by taking the net additional revenue ($96,000) and subtracting the cost of the machine ($80,000) to get the net profit. Then you divide the net profit by the cost of the machine and multiply by 100 to get the percentage rate of return.

Net Profit = Net Additional Revenue - Cost of Machine = $96,000 - $80,000 = $16,000

Expected Rate of Return = (Net Profit / Cost of Machine) × 100 = ($16,000 / $80,000) × 100 = 20%

Therefore, the expected rate of return on this tool is 20 percent.