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In: Accounting
Average Rate of Return The following data are accumulated by Eco Labs, Inc. in evaluating two...
Average Rate of Return
The following data are accumulated by Eco Labs, Inc. in evaluating two competing capital investment proposals:
| Testing Equipment | Vehicle | ||||
| Amount of investment | $40,000 | $48,000 | |||
| Useful life | 4 years | 5 years | |||
| Estimated residual value | 0 | 0 | |||
| Estimated total income over the useful life | $6,000 | $12,600 | |||
Determine the expected average rate of return for each proposal. If required, round your answers to one decimal place.
| Testing Equipment | % |
| Vehicle | % |
Solutions
Expert Solution
Average rate of return for testing Equipment:
Formula for average rate of return = Estimated total income per annum/Average investment
Estimated total income per annum = $ 6000/4
= $ 1500
Average investment = (Investment – salvage value)/2
= ($40,000)/2 = $20000
ARR = $ 1500 / $ 20000 = 7.50%
Average rate of return for testing Equipment:
Estimated total income per annum = $12600/5
= $2520
Average investment = $48,000/2 = $24,000
ARR = $2520/$24,000
= 10.50%
ekkarill92 answered 2 years agoRelated Solutions
The following data are accumulated by Eco Labs, Inc. in evaluating two competing capital investment proposals:...
The following data are accumulated by Eco Labs, Inc. in
evaluating two competing capital investment proposals:
Testing Equipment
Vehicle
Amount of investment
$56,000
$40,000
Useful life
4 years
5 years
Estimated residual value
0
0
Estimated total income over the useful life
$8,400
$10,500
Determine the expected average rate of return for each proposal.
If required, round your answers to one decimal place.
Testing Equipment
%
Vehicle
%
Average Rate of Return The following data are accumulated by Lone Peak Inc. in evaluating two...
Average Rate of
Return
The following data are
accumulated by Lone Peak Inc. in evaluating two competing capital
investment proposals:
3D Printer
Truck
Amount of investment
$24,000
$48,000
Useful life
4 years
7 years
Estimated residual value
0
0
Estimated total income over the useful life
$1,920
$13,440
Determine the expected
average rate of return for each proposal. If required, round your
answers to one decimal place.
3D Printer
%
Truck
%
Average Rate of Return The following data are accumulated by Lone Peak Inc. in evaluating two...
Average Rate of
Return
The following data are
accumulated by Lone Peak Inc. in evaluating two competing capital
investment proposals:
3D Printer
Truck
Amount of investment
$92,000
$88,000
Useful life
4 years
9 years
Estimated residual value
0
0
Estimated total income over the useful life
$10,120
$35,640
Determine the expected
average rate of return for each proposal. If required, round your
answers to one decimal place.
3D Printer
%
Truck
%
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Average Rate of Return The following data are accumulated by McDermott Motors Inc. evaluating two competing...
Average Rate of Return The following data are accumulated by
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proposals: Testing Equipment Diagnostic Software Amount of
investment $48,000 $20,000 Useful life 4 years 5 years Estimated
residual value $0 $0 Estimated total income over the useful life
$5,280 $4,750 Determine the expected average rate of return for
each proposal. If required, round to one decimal place. Testing
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The following data are accumulated by Reynolds Company in evaluating the purchase of $164,000 of equipment,...
The following data are accumulated by Reynolds Company in
evaluating the purchase of $164,000 of equipment, having a
four-year useful life:
Net Income
Net Cash Flow
Year 1
$35,000
$60,000
Year 2
22,000
46,000
Year 3
11,000
35,000
Year 4
(1,000)
23,000
Present Value of $1 at Compound
Interest
Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893
0.870
0.833
2
0.890
0.826
0.797
0.756
0.694
3
0.840
0.751
0.712
0.658
0.579
4
0.792
0.683
0.636
0.572
0.482
5...
1. The following data are accumulated by Paxton Company in evaluating the purchase of $127,800 of...
1. The following data are accumulated by Paxton Company in
evaluating the purchase of $127,800 of equipment, having a
four-year useful life:
Net Income
Net Cash Flow
Year 1
$30,000
$50,000
Year 2
18,000
39,000
Year 3
9,000
29,000
Year 4
(1,000)
20,000
Present Value of $1 at Compound
Interest
Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893
0.870
0.833
2
0.890
0.826
0.797
0.756
0.694
3
0.840
0.751
0.712
0.658
0.579
4
0.792
0.683
0.636
0.572
0.482...
The following data are accumulated by Geddes Company in evaluating the purchase of $92,700 of equipment,...
The following data are accumulated by Geddes Company in
evaluating the purchase of $92,700 of equipment, having a four-year
useful life:
Net Income
Net Cash Flow
Year 1
$30,000
$50,000
Year 2
18,000
39,000
Year 3
9,000
29,000
Year 4
(1,000)
20,000
Present Value of $1 at Compound
Interest
Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893
0.870
0.833
2
0.890
0.826
0.797
0.756
0.694
3
0.840
0.751
0.712
0.658
0.579
4
0.792
0.683
0.636
0.572
0.482
5...
Clonex Labs, Inc., uses the weighted-average method in its process costing system. The following data are...
Clonex Labs, Inc., uses the weighted-average method in its
process costing system. The following data are available for one
department for October:
Percent Completed
Units
Materials
Conversion
Work in process, October 1
34,000
58
%
25
%
Work in process, October 31
15,000
83
%
44
%
The department started 167,000 units into production during the
month and transferred 186,000 completed units to the next
department.
Required:
Assuming the company uses the FIFO method, compute the
equivalent units of production...
Clonex Labs, Inc., uses the weighted-average method in its process costing system. The following data are...
Clonex Labs, Inc., uses the weighted-average method in its
process costing system. The following data are available for one
department for October:
Percent Completed
Units
Materials
Conversion
Work in process, October 1
54,000
95
%
60
%
Work in process, October 31
35,000
73
%
50
%
The department started 392,000 units into production during the
month and transferred 411,000 completed units to the next
department.
Required:
Compute the equivalent units of production for October.
Clonex Labs, Inc., uses the weighted-average method in its process costing system. The following data are...
Clonex Labs, Inc., uses the weighted-average method in its
process costing system. The following data are available for one
department for October:
Percent Completed
Units
Materials
Conversion
Work in process,
October 1
48,000
85
%
60
%
Work in process, October 31
28,000
67
%
49
%
The department started 389,000 units into production during the
month and transferred 409,000 completed units to the next
department.
Required:
Compute the equivalent units of production for October.
QUESTION 1) materials:
QUESTION 2)...
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