Question

Hamell Company has gathered the following data on a proposed investment project: Discount rate 8% Life of the project 8 years Initial investment $330,000 Annual cash inflows 54,450 Salvage value 0 Assume that excess of incremental revenues over the incremental expenses (including depreciation) equal the annual cash inflows. The simple rate of return on the proposed investment is closest to: (Round your answer to 1 decimal place.)

Answer 1

Answer: 16.5%

Step-by-step explanation:

Following the information given in the question, the simple rate of return on the proposed investment will be calculated thus:

= Annual cash flow / Initial investment

= $54,450 / $330,000

= 0.165

= 16.5%

Therefore, the simple rate of return on the proposed investment is 16.5%.