Tharpe Painting Company is considering whether to purchase a new spray paint machine that costs ($3,000) .

Question:

Tharpe Painting Company is considering whether to purchase a new spray paint machine that costs $$3,000$ . The machine is expected to save labor, increasing net income by $$450$ per year. The effective life of the machine is 15 years according to the manufacturer’s estimate.

Required

a. Determine the unadjusted rate of return based on the average cost of the investment.

b. Discuss the shortcomings of using the unadjusted rate of return to evaluate investment opportunities.

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Asim farooq

I have done MS finance and expertise in the field of Accounting, finance, cost accounting, security analysis and portfolio management and management, MS office is at my fingertips, I want my client to take advantage of my practical knowledge. I have been mentoring my client on a freelancer website from last two years, Currently I am working in Telecom company as a financial analyst and before that working as an accountant with Pepsi for one year. I also join a nonprofit organization as a finance assistant to my job duties are making payment to client after tax calculation, I have started my professional career from teaching I was teaching to a master's level student for two years in the evening. My Expert Service Financial accounting, Financial management, Cost accounting, Human resource management, Business communication and report writing. Financial accounting : • Journal entries • Financial statements including balance sheet, Profit & Loss account, Cash flow statement • Adjustment entries • Ratio analysis • Accounting concepts • Single entry accounting • Double entry accounting • Bills of exchange • Bank reconciliation statements Cost accounting : • Budgeting • Job order costing • Process costing • Cost of goods sold Financial management : • Capital budgeting • Net Present Value (NPV) • Internal Rate of Return (IRR) • Payback period • Discounted cash flows • Financial analysis • Capital assets pricing model • Simple interest, Compound interest & annuities

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