Average Rate of Return Clancy Company is considering the purchase of equipment for $120,000. The equipment will expand the company's production and increase revenue by $42,200 per year. Annual cash operating expenses will increase by $8,000. The equipment's useful life is 10 years with no salvage value. Clancy uses straight- line depreciation. The income tax rate is 35%. What is the average rate of return on the investment? Do not use negative signs with your answers. Increase in revenue Answer Increase in expenses Answer Pretax income from investment Answer Income tax expense Answer Net income from investment Answer Round answer to the nearest whole percentage, if applicable. Average rate of return on investment Answer %

Average Rate of Return Clancy Company is considering the purchase of equipment for $120,000. The equipment will expand the company's production and increase revenue by $42,200 per year. Annual cash operating expenses will increase by $8,000. The equipment's useful life is 10 years with no salvage value. Clancy uses straight- line depreciation. The income tax rate is 35%. What is the average rate of return on the investment? Do not use negative signs with your answers. Increase in revenue Answer Increase in expenses Answer Pretax income from investment Answer Income tax expense Answer Net income from investment Answer Round answer to the nearest whole percentage, if applicable. Average rate of return on investment Answer %

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Description: Average Rate of ReturnClancy Company is considering the purchase of equipment for $120,000. Theequipment will expand the company's production and increase revenue by$42,200 per year. Annual cash operating expenses will increase by $8,000. Theequipme

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.

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Question

Average Rate of Return
Clancy Company is considering the purchase of equipment for $120,000. The
equipment will expand the company's production and increase revenue by
$42,200 per year. Annual cash operating expenses will increase by $8,000. The
equipment's useful life is 10 years with no salvage value. Clancy uses straight-
line depreciation. The income tax rate is 35%. What is the average rate of return
on the investment?
Do not use negative signs with your answers.
Increase in revenue
Answer
Increase in expenses
Answer
Pretax income from investment
Answer
Income tax expense
Answer
Net income from investment
Answer
Round answer to the nearest whole percentage, if applicable.
Average rate of return on investment
Answer %

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