Ayayai’s Hair Salon is considering opening a new location in French Lick, California. The cost of building a new salon is $260,000. A new salon will normally generate annual revenues of $55,200, with annual expenses (including depreciation) of $38,500. At the end of 15 years the salon will have a salvage value of $74,000. Calculate the annual rate of return on the project. Annual rate of return %
Annual rate of return = Net annual income/Average investment
= (55,200-38,500)/[(260,000+74,000)/2]
= 16,700/167,000
= 10%
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Ayayai’s Hair Salon is considering opening a new location in French Lick, California. The cost of...
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