Average Rate of Return-Cost Savings Sager Industries is considering an investment in equipment that will replace direct labor. The equipment has a cost of $91,000 with a $8,000 residual value and a 10-year life. The equipment will replace three employees who has an average total wages of $18,640 per year. In addition, the equipment will have operating and energy costs of $4,400 per year. Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment. %
Average Rate of Return-Cost Savings Sager Industries is considering an investment in equipment that will replace direct labor. The equipment has a cost of $91,000 with a $8,000 residual value and a 10-year life. The equipment will replace three employees who has an average total wages of $18,640 per year. In addition, the equipment will have operating and energy costs of $4,400 per year. Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment. %
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 2E: Average rate of returncost savings Maui Fabricators Inc. is considering an investment in equipment...
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Given that:
Cost of Equipment = $91000
Residual value = $8000
Life = 10 years
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