Average Rate of Return—Cost Savings Midwest Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $96,000 with a $8,000 residual value and a ten-year life. The equipment will replace one employee who has an average wage of $18,140 per year. In addition, the equipment will have operating and energy costs of $4,660 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 Midwest Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $96,000 with a $8,000 residual value and a ten-year life. The equipment will replace one employee who has an average wage of $18,140 per year. In addition, the equipment will have operating and energy costs of $4,660 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.
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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Midwest Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $96,000 with a $8,000 residual value and a ten-year life. The equipment will replace one employee who has an average wage of $18,140 per year. In addition, the equipment will have operating and energy costs of $4,660 per year.
Determine the average rate of return on the equipment, giving effect to straight-line
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