Alter company's manager has proposed installing an equipment that will cost $36,000,have a 8-year life,and have no salvage value.The company estimates that the machine could produce 4000 units which can be sold evenly throughout the year.The expected income through the life of machinery is $16,000.The machine will generate net cash flows per year of $8,000.Calculate the average rate of return on the investment.

Alter company's manager has proposed installing an equipment that will cost $36,000,have a 8-year life,and have no salvage value.The company estimates that the machine could produce 4000 units which can be sold evenly throughout the year.The expected income through the life of machinery is $16,000.The machine will generate net cash flows per year of $8,000.Calculate the average rate of return on the investment.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 3P

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