Salt company is considering investing in a new facility to extract and produce salt. the facility will increase revenues by $220,000, but it will also increase annual expenses by $160,000. the facility will cost $980,000 to build, and it will have a $20,000 salvage value at the end of its useful life. calculate the annual rate of return on this facility. annual rate of return %

12%

Explanation:

Annual net income:

= Increase in annual revenue - Increase in annual costs

= $220,000 - $160,000

= $60,000

Average investment:

= (Initial investment + Salvage value at the end) ÷ 2

= (980,000 + 20,000) ÷ 2

= $500,000

Annual rate of return:

= (Annual net income ÷ Average investment) × 100

= ($60,000 ÷ $500,000) × 100

= 12%

answer; by looking at total product,marginal product,and changes in both after changes in inputs

answer; capital structure decision;