17.Pid has invested in a machine that cost $70,000, that has a useful life of seven years, and that has no salvage value at the end of its useful life. The machine is being depreciated by the straight-line method, based on its useful life. It will have a payback period of four years. Given these data, the simple rate of return on the machine is closest to:
A)7.1%.
B)8.2%.
C)10.7%.
D)39.3%
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To calculate the simple rate of return on the machine, we need to know the annual net cash inflow generated by the machine. However, this information is not provided in the question.
The payback period is the length of time it takes to recover the initial investment. In this case, the machine has a payback period of four years. This means that after four years, the net cash inflow from the machine will have covered the initial investment of $70,000.
To find the annual net cash inflow, we can divide the initial investment by the payback period: $70,000 / 4 years = $17,500 per year.
Now that we have the annual net cash inflow, we can calculate the simple rate of return by dividing the annual net cash inflow by the initial investment and multiplying by 100%: ($17,500 / $70,000) * 100% = 25%.
However, none of the given answer options match this result. Therefore, there might be an error in the question or additional information is needed to calculate the accurate simple rate of return.