Average Rate of Return-Cost Savings Northwest Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $103,000 with a $9,000 residual value and a five-year life. The equipment will replace one employee who has an average wage of $32,680 per year. In addition, the equipment will have operating and energy costs of $9,960 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 Northwest Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $103,000 with a $9,000 residual value and a five-year life. The equipment will replace one employee who has an average wage of $32,680 per year. In addition, the equipment will have operating and energy costs of $9,960 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

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Consider a piece of industrial equipment that has an installed cost of $ 100,000. The equipment is expected to generate $30,000 worth of annual energy saving during its 1st year of installation. The value of these annual savings is expected to increased at the rate at 5% per year because of increased fuel costs. Assumes that the equipment has a service life of 5 years ( or 3000 operating hrs per year) with no appreciable salvage value. Determine the equivalent and savings per each operating hours at i=14%.
Operating costs are an important criteria when selecting what machinery would be the best choice for a company. What is the EUAW of this investment that costs $53,700, has annual benefits of $8,162/year, annual costs of $1,540/year, and a disposal cost of $4,800 at the end of its useful life? It has a useful life of 14 years. Use a 15% MARR.
A manufacturer of automated optical inspection devices is deciding on a project to increase the productivity of the manufacturing processes. The estimated costs for the two feasible alternatives being compared are shown below. Use the internal rate of return (IRR) method to determine which alternative should be selected if the analysis period is 8 years and the company's MARR is 4% per year. Alternative M N Initial costs $30,000 $45,000 Net annual cash flow $4,500 $7,000 Life in years 8 8 (a) IRR of base alternative = (b) IRR of incremental cash flow = (c) Choose Alternative
The purchasing price for a dye press is $30,000. It is expected to provide labour cost savings of $5,000 in year 1. The savings are expected to increase linearly by X$ each year for seven years. Find the dollar value of X such that the purchase price is justified by the labour savings at MARR = 5%.The solution is with $1 of which of the following?65.8067.8069.8071.80None of the above
The Fence Company is setting up a new production line to produce top rails. The relevant data for two alternatives are shown below. Solve, a. Based on MARR of 8%, determine the annual rate of production for which the alternatives are equally economical. b. If it is estimated that production will be 300 top rails per year, which alternative is preferred and what will be the total annual cost?
cure Rex Industries plans to expand its product line. The project requires an initial investment of $285,000 to purchase new equipment. The project is expected to generate the following annual revenues and expenses each year during its 9-year life: . Sales revenues Variable costs Contribution margin Fixed costs: - Salary expense - Rent expense Depreciation expense O 4.4 years O 4.6 years O 8.4 years $31,000 39,000 30,000 O 8.9 years O None of the above $170,000 (38,000) $132,000 Operating income The only non-cash item of income or expense is depreciation expense. The salvage value of the equipment at the end of the 9 years is $15,000. What is the payback period of this project in years? Round to one decimal point. (100,000) $32,000 PQ
please answer with full work explanation calculation etc. please answer correctly KB. Chicago Co. is interested in purchasing a machine that would improve its operational efficiency. The cost is $200,000 with an estimated residual value of $20,000 and a useful life of eight years. Cash inflows are expected to increase by $40,000 a year. The company's minimum rate of return is 10 percent.The net present value of the project is
The plant manager of Orlando Electronics Company is considering the purchase of new automated assembly equipment. The new equipment will cost $275,000. The manager believes that the new investment will result in direct labor savings of $55,000 per year for 10 years. Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 a. What is the payback period on this project?fill in the blank 1 of 1 years b. What is the net present value, assuming a 10% rate of return? Use the table provided above. Round to the nearest whole dollar.Net present value fill in the blank 1 of 1$ c. What else should the manager consider in the analysis?