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 $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.
%
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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 $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. %
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