Average Rate of Return-Cost Savings Maui Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $90,000 with a $8,000 residual value and a ten-year life. The equipment will replace one employee who has an average wage of $15,980 per year. In addition, the equipment will have operating and energy costs of $4,350 per year. Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment. If required, round to the nearest whole percent. X % Feedback V Check My Work Divide the estimated average annual income by the average investment. Average savings less depreciation expense less additional operating costs equals average annual income.

Average Rate of Return-Cost Savings Maui Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $90,000 with a $8,000 residual value and a ten-year life. The equipment will replace one employee who has an average wage of $15,980 per year. In addition, the equipment will have operating and energy costs of $4,350 per year. Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment. If required, round to the nearest whole percent. X % Feedback V Check My Work Divide the estimated average annual income by the average investment. Average savings less depreciation expense less additional operating costs equals average annual income.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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(engineering economic) a company considers purchasing a machine for $3000. The tool is planned to be used for 10 years and after that it will be sold for 25% of its purchase price. With the purchase of the tool, the company must incur operating costs of $ 400 per year. If the owner of the company wants a return of 10% annually on the investment made, what is the uniform annual income for at least 10 years that must be obtained from the heavy equipment so that the wishes of the owner of the company are fulfilled?
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