Arrowhead Inc. is considering an investment in new equipment that will be used to manufacture a mobile communications product. The product is expected to generate additional annual sales of 7,100 units at $276.00 per unit. The equipment has a cost of $726,300, residual value of $54,700, and an 8-year life. The equipment only can be used to manufacture the product. The cost to manufacture the product is shown below. Cost per unit: Direct labor $45.00 Direct materials 177.00 Factory overhead (including depreciation) 30.35 Total cost per unit $252.35 Determine the average rate of return on the equipment.

Arrowhead Inc. is considering an investment in new equipment that will be used to manufacture a mobile communications product. The product is expected to generate additional annual sales of 7,100 units at $276.00 per unit. The equipment has a cost of $726,300, residual value of $54,700, and an 8-year life. The equipment only can be used to manufacture the product. The cost to manufacture the product is shown below. Cost per unit: Direct labor $45.00 Direct materials 177.00 Factory overhead (including depreciation) 30.35 Total cost per unit $252.35 Determine the average rate of return on the equipment.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 13P

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