Dylan Company Is Considering an Investment in New Equipment Costing

Multiple Choice

Dylan Company is considering an investment in new equipment costing $720,000. The equipment will be depreciated on a straight-line basis over a five-year life and is expected to have a salvage value of $45,000. The equipment is expected to generate net cash flows totaling $970,000 during the five years. What is the rate of return associated with the equipment investment?

A) 15.4%
B) 16.4%
C) 30.4%
D) 13.9%