A store manager must decide how many rug cleaners to rent to customers. The manager estimates that the first would yield $200 a year, the second $150, the third $75, and the fourth $50. If the interest rate is 12 percent and each rug cleaner costs $500/yr (all costs included), including replacement cost, how many should the manager rent?

The store manager must decide to buy 3

Explanation:

Given that:

As we know that the rate of return will be: Income / Investment

So the rate of return of:

Only three rug cleaners have the rate of return greater than the interest rate so the store manager must decide to buy 3

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