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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 $138,000 with a $12,000 residual value and a ten-year life. The equipment will replace one employee who has an average wage of $26,030 per year. In addition, the equipment will have operating and energy costs of $6,680 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. %

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 $138,000 with a $12,000 residual value and a ten-year life. The equipment will replace one employee who has an average wage of $26,030 per year. In addition, the equipment will have operating and energy costs of $6,680 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. %

FINANCIAL ACCOUNTING
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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Capital Investment Analysis: Maui Fabrications Inc.

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 $138,000 with a $12,000 residual value and a ten-year life. The equipment will replace one employee who has an average wage of $26,030 per year. In addition, the equipment will have operating and energy costs of $6,680 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. %
Transcribed Image Text: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 $138,000 with a $12,000 residual value and a ten-year life. The equipment will replace one employee who has an average wage of $26,030 per year. In addition, the equipment will have operating and energy costs of $6,680 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. %
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