Wombles Corporation Is Contemplating Purchasing Equipment That Would Increase Sales

Multiple Choice

Wombles Corporation is contemplating purchasing equipment that would increase sales revenues by $478,000 per year and cash operating expenses by $249,000 per year. The equipment would cost $738,000 and have a 9 year life with no salvage value. The annual depreciation would be $82,000. The simple rate of return on the investment is closest to:

A) 19.9%
B) 30.8%
C) 31.0%
D) 11.1%