Average Rate of Return Lakeland Company is considering the purchase of equipment for $175,000. The equipment will expand the Company's production and increase revenue by $40,000 per year. Annual cash operating expenses will increase by $12,000. The equipment's useful life is 10 years with no salvage value. Lakeland uses straight-line depreciation. The income tax rate is 25%. What is the average rate of return on the investment? Do not use negative signs with your answers. Increase in revenue Answer Increase in expenses Answer Pretax income from investment Answer Income tax expense Answer Net income from investment Answer Round answer to the nearest whole percentage, if applicable. Average rate of return on investment Answer %
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Average
Lakeland Company is considering the purchase of equipment for $175,000. The equipment will expand the Company's production and increase revenue by $40,000 per year. Annual cash operating expenses will increase by $12,000. The equipment's useful life is 10 years with no salvage value. Lakeland uses straight-line
Do not use negative signs with your answers.
| Increase in revenue | Answer
|
| Increase in expenses | Answer
|
| Pretax income from investment | Answer
|
| Income tax expense | Answer
|
| Net income from investment | Answer
|
Round answer to the nearest whole percentage, if applicable.
Average rate of return on investment
Answer
%
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