Refer to the data in PE 23-6. What is the unadjusted rate of return on the investment?

Question:

Refer to the data in PE 23-6. What is the unadjusted rate of return on the investment? Note: The investment is expected to have a useful life of 10 years, and Casper uses straight-line depreciation with zero salvage value.

Data from PE 23-6

Casper Company paid $25,000 cash for a capital investment. The company expects the investment to generate net cash inflows of $5,500 per year. What is the payback period of this investment?

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... Payback Period
Payback period method is a traditional method/ approach of capital budgeting. It is the simple and widely used quantitative method of Investment evaluation. Payback period is typically used to evaluate projects or investments before undergoing them,...