A Company Is Considering Purchasing Factory Equipment That Costs $320000

Multiple Choice

A company is considering purchasing factory equipment that costs $320000 and is estimated to have no salvage value at the end of its 8-year useful life. If the equipment is purchased annual revenues are expected to be $90000 and annual operating expenses exclusive of depreciation expense are expected to be $40000. The straight-line method of depreciation would be used. If the equipment is purchased the annual rate of return expected on this equipment is

A) 31.3%.
B) 6.25%.
C) 3.125%.
D) 15.6%.