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Average Rate of Return-Cost Savings Sager Industries is considering an investment in equipment that will replace direct labor. The equipment has a cost of $99,000
Average Rate of Return-Cost Savings Sager Industries is considering an investment in equipment that will replace direct labor. The equipment has a cost of $99,000 with a $9,000 residual value and a 10-year life. The equipment will replace three employees who has an average total wages of $25,110 per year. In addition, the equipment will have operating and energy costs of $4,770 per year. Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment. 12.6 X % Feedback Check My Work Divide the estimated average annual income by the average investment. Average savings less depreciation expense less additional operating costs equals average annual income. Sum of beginning investment and residual value divided by two equals average investment
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