Question
Average rate of return-new product Oahu Inc. is considering an investment in new equipment that will be used to manufacture a smartphone. The phone
Average rate of return-new product Oahu 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 6,200 units at $239 per unit. The equipment has a cost of $691,900, residual value of $52,100, and an 8-year life. The equipment can only be used to manufacture the phone. The cost to manufacture the phone follows: Cost per unit: Direct labor Direct materials Factory overhead (including depreciation) Total cost per unit $39.00 151.00 25.00 $215.00 Determine the average rate of return on the equipment. If required, round to the nearest whole percent. %
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