$$\text { Reference: } 10 - 10$$ Fast Food, Inc

$$\text { Reference: } 10 - 10$$ Fast Food, Inc. has purchased a new donut maker. It cost $16,000 and has an estimated life of 10 years with no salvage value. The following annual donut sales and expenses are projected: $$\begin{array} { | l | r | l | } \hline \text { Sales } & & \$ 22,000 \\\hline \text { Expenses: } & & \\\hline \text { Flour, etc., required in making donuts } & \$ 10,000 & \\\hline \text { Salaries } & 6,000 & \\\hline \text { Depreciation } & 1,600 & 17,600 \\\hline \text { Net income } & & \$ 4,400 \\\hline\end{array}$$
-The simple rate of return for the new machine is closest to:

A) 27.5%.
B) 20.0%.
C) 37.5%.
D) 80.0%.

Correct Answer:

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