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Maui Fabricators Inc. is considering an investment in equipment that will replace direct labor.
The equipment has a cost of $87,000 with a $7,000 residual value and a five-year life. The
equipment will replace one employee who has an average wage of $30,120 per year. In addition,
the equipment will have operating and energy costs of $8,480 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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Maui Fabricators Inc. is considering an investment in equipment that.pdf

  • 1. Maui Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $87,000 with a $7,000 residual value and a five-year life. The equipment will replace one employee who has an average wage of $30,120 per year. In addition, the equipment will have operating and energy costs of $8,480 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.