1. 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 $108,000 with a $9,000 residual value and a five-year life. the equipment will replace one employee who has an average wage of $41,405 per year. in addition, the equipment will have operating and energy costs of $10,490 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. % 2. average rate of return?new product galactic inc. is considering an investment in new equipment that will be used to manufacture

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17-08-2022
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1. 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 $108,000 with a $9,000 residual value and a five-year life. the equipment will replace one employee who has an average wage of $41,405 per year. in addition, the equipment will have operating and energy costs of $10,490 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. % 2. average rate of return?new product galactic inc. is considering an investment in new equipment that will be used to manufacture

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yogeshkumar49685 yogeshkumar49685 · Answer 1 · 2022-08-27T02:35:06-04:00

If the cost of equipment be $108000, residual value be $9000 and life is 5 years and the wage of employee be $41405 then the average rate of return is $11115 per annum.

Given that the cost of equipment be $108000, residual value be $9000 and life is 5 years and the wage of employee be $41405.

We are required to find the average rate of return of the equipment.

Depreciation of equipment=(108000-9000)/5=$19800 per year

Additional maintenance cost=$10490 per year

Total cost incurred per year on equipment=19800+10490

=$30290 per year

Wage of employee that is replaced=$41405 per year.

Profit by using equipment=41405-30290

=$11115 per year.

Hence if the cost of equipment be $108000, residual value be $9000 and life is 5 years and the wage of employee be $41405 then the average rate of return is $11115 per annum.

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