Blossom Company is considering a long-term investment project called ZIP. ZIP will require an investment of $116,000. It will have useful life of 4 years and no salvage value. Annual revenues would increase by $79,020, and annual expenses (excluding depreciatio would increase by $39,000. Blossom uses the straight-line method to compute depreciation expense. The company's required rate- return is 16%.
Blossom Company is considering a long-term investment project called ZIP. ZIP will require an investment of $116,000. It will have useful life of 4 years and no salvage value. Annual revenues would increase by $79,020, and annual expenses (excluding depreciatio would increase by $39,000. Blossom uses the straight-line method to compute depreciation expense. The company's required rate- return is 16%.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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am. 121.
Transcribed Image Text:Blossom Company is considering a long-term investment project called ZIP. ZIP will require an investment of $116,000. It will have a
useful life of 4 years and no salvage value. Annual revenues would increase by $79,020, and annual expenses (excluding depreciation)
would increase by $39,000. Blossom uses the straight-line method to compute depreciation expense. The company's required rate of
return is 16%.
Compute the annual rate of return.
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