Midwest Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $107,000 with a $9,000 residual value and a five-year life. The equipment will replace one employee who has an average wage of $38,110 per year. In addition, the equipment will have operating and energy costs of $10,390 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. %
Midwest Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $107,000 with a $9,000 residual value and a five-year life. The equipment will replace one employee who has an average wage of $38,110 per year. In addition, the equipment will have operating and energy costs of $10,390 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. %
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text: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
$107,000 with a $9,000 residual value and a five-year life. The equipment will replace one employee who has an average wage of
$38,110 per year. In addition, the equipment will have operating and energy costs of $10,390 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.
%
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