Ch 25 Pro. 2Please give me step by step instructions to calculate the answer.Average Rate of Return—Cost SavingsMaster Fab Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $99,000 with a $9,000 residual value and a 10-year life. The equipment will replace one employee who has an average wage of $22,950 per year. In addition, the equipment will have operating and energy costs of $4,770 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.__________________ %Liz C

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Asked Nov 22, 2019
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Ch 25 Pro. 2

Please give me step by step instructions to calculate the answer.

Average Rate of Return—Cost Savings

Master Fab Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $99,000 with a $9,000 residual value and a 10-year life. The equipment will replace one employee who has an average wage of $22,950 per year. In addition, the equipment will have operating and energy costs of $4,770 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.
__________________ %

Liz C

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Expert Answer

Step 1

Determine the average rate of return o...

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Estimated average annual income Average rate of return Average investment $9,180 $54,000 =0.17 or,17%

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