Question
Chapter 12 Question 5 Average Rate of Return Lakeland Company is considering the purchase of equipment for $166,000. The equipment will expand the Company's production
Chapter 12 Question 5
Average Rate of Return
Lakeland Company is considering the purchase of equipment for $166,000. The equipment will expand the Company's production and increase revenue by $52,000 per year. Annual cash operating expenses will increase by $10,000. The equipment's useful life is 10 years with no salvage value. Lakeland uses straight-line depreciation. The income tax rate is 35%. What is the average rate of return on the investment?
Do not use negative signs with your answers.
| Increase in revenue |
|
| Increase in expenses |
|
| Pretax income from investment |
|
| Income tax expense |
|
| Net income from investment |
|
Round answer to the nearest whole percentage, if applicable.
Average rate of return on investment % ?
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