A company that manufactures automobile headlight housings invested $750,000 in an automated assembly line. The resultant savings was $190,000 per year for 6 years. If the equipment had a salvage value of $50,000, what rate of return per year did the company make?

A company that manufactures automobile headlight housings invested $750,000 in an automated assembly line. The resultant savings was $190,000 per year for 6 years. If the equipment had a salvage value of $50,000, what rate of return per year did the company make?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 3P

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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