Unadjusted Rate of Return Method
Response to the following problem:
Um Good, Inc., a candy maker, is thinking of purchasing a new machine. A marketing firm has estimated that the new machine could increase revenues by $30,000 a year for the next five years. The expenses (including depreciation) directly relating to the machine total $100,000 ($20,000 x 5 years). The initial purchase cost would be $80,000. What is the unadjusted rate of return?