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Homework answers / question archive / Germain Company purchased a new machine for $200,000 and will use the straight-line method of depreciation over 4 years with no salvage value
Germain Company purchased a new machine for $200,000 and will use the straight-line method of depreciation over 4 years with no salvage value. If the company's minimum annual rate of return is 10%, this investment must generate expected annual income of
A.$10,000
B.$3,000
C.$20,000
D.$50,000
Computation of the expected annual income:-
Average investment = ( Initial investment + Salvage value)/2
= ($200,000+0)/2
= $100,000
Expected annual income = Average investment * Annual rate of return
= $100,000 * 10%
= $10,000
Correct option is A). $10,000
