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Question(s) / Instruction(s):

An expansion at Fenstermacher, Inc., would increase sales revenues by $315,000 per year and cash operating expenses by $186,000 per year. The initial investment would be for equipment that would cost $405,000 and have a 5 year life with no salvage value. The annual depreciation on the equipment would be $81,000. The simple rate of return on the investment is closest to:

a)            31.9%

b)            15.2%

c)            20.0%

d)            11.9%

 

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