FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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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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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