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. Average Rate of Return-New Product Hana Inc. is considering an investment in new equipment that will be used to manufacture a smartphone. The phone
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Average Rate of Return-New Product Hana Inc. is considering an investment in new equipment that will be used to manufacture a smartphone. The phone is expected to generate additional annual sales of 10,000 units at $300 per unit. The equipment has a cost of $4,500,000, residual value of $500,000, and a 10-year life. The equipment can only be used to manufacture the phone. The cost to manufacture the phone follows: Cost per unit: Direct labor $ 18.00 Direct materials 90.00 Factory overhead (including depreciation) 112.00 Total cost per unit $220.00 Determine the average rate of return on the equipment. 18 X % Feedback Check My Work Divide the estimated average annual income by the average investment. Sales price x units sold, less unit cost * units sold, equals average annual incomeStep by Step Solution
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