Swift oil company is considering investing in a new oil well. it is expected that the oil well will increase annual revenues by $140,000 and will increase annual expenses by $88,000 including depreciation. the oil well will cost $465,000 and will have a $10,000 salvage value at the end of its 10-year useful life. calculate the annual rate of return. (round answer to 2 decimal places, e. g. 12.47.)

Annual rate of return = 21.89%

Explanation:

Given that,

Expected increase in annual revenues by = $140000

Expected increase in annual expenses by =  $88,000 including depreciation

Cost of oil well = $465,000

salvage value at the end of its 10-year useful life = $10,000

Expected Income = Expected increase in annual revenues - Expected increase in annual expenses

= 140000 - 88000

=$52000

Average investment =

= $237500

Annual rate of return =

=

= 21.89%

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