Fast Food, Inc., has purchased a new donut maker. It cost $16,000 and has an estimated life of 10 years. The following annual donut sales and expenses are projected (Ignore income taxes.): Sales $22,000Expenses: Flour, etc., required in making donuts$10,000 Salaries 6,000 Depreciation 1,600 17,600Net operating income $4,400Assume cash flows occur uniformly throughout a year except for the initial investment.The simple rate of return for the new machine is closest to:
A. 37.5%
B. 27.5%
C. 80.0%
D. 20%
Answer: B
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