A company spent $40,000 on a production control system that will increase profits by $13,400 per...
A company spent $40,000 on a production control system that will increase profits by $13,400 per year for 5 years. The rate of return per year on the investment is closest to:
a. 16%
b. 20%
c. Less than 15%
d. 18%
Homework Answers
t = 5 years
increase in profits per year = $ 13400
rate of return = r
PV = $ 40000
40000 = 13400/(1 + r) +.... + 13400/(1 + r)5
r = 20.08% (option b)
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