$$\text { Reference: } 10 - 11$$ Purvell Company Has Just Acquired a New Machine

$$\text { Reference: } 10 - 11$$ Purvell Company has just acquired a new machine. Data on the machine follow: $$\begin{array} { | l | l | } \hline \text { Purchase cost } & \$ 50,000 \\\hline \text { Annual cost savings } & \$ 15,000 \\\hline \text { Life of the machine } & 8 \text { years } \\\hline\end{array}$$ The company uses straight-line depreciation and a $5,000 salvage value. (The company considers salvage value in making depreciation deductions.) Assume cash flows occur uniformly throughout a year.
-The simple rate of return would be closest to?

A) 17.5%.
B) 30.0%.
C) 18.75%.
D) 12.5%.

Correct Answer:

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