Answer:
Jefferson Company the un-adjusted rate of return is 3.64%
Step-by-step explanation:
To Find-out the Un-adjusted Rate of return we have to compute the Depreciation Cost
Depreciation Cost = (Investment - Salvage Cost) / Machine Life
Depreciation Cost = ($33,000 - $8,000) / 5
Depreciation Cost = $25,000 / 5
Depreciation Cost = $5,000
Net Income = (Annual before tax net cash inflow - Depreciation Cost) × (1 - Income Tax Rate)
Net Income = ($7,000 - $5,000) × (1 - 40%)
Net Income = ($2,000) × (0.60)
Net Income = $1,200
Un-Adjustable Rate of Return = Net Income / Investment
Un-Adjustable Rate of Return = $1,200 / $33,000
Un-Adjustable Rate of Return = 3.64%