PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, its sales to stay in Protected View UPDATES AVAILABLE Updates for Office are ready to be installed, but first we need to close some apps. Update now Enable Editing F31 : x fe " AIB ICILE 1 Enter titles and accounts in the green cells 2 Enter Numbers in the blue cells 3. Enter your Calculations in the yellow cells KLIMNOPQIR Formula of accounting rate of return (ARR): Incremental income is the increased income with the installation of the new machine Incremental operating expenses is the increased expenses with the installation of new machine Accounting/Simple rate of return Incremental accounting income Initial investment is the amount of investment for the new machine. = Initial investment Problem The Louisville Sluggers wants to replace an old machine with a new one to increase the output of baseball bats. The old machine can be sold to a small factory for $13,000 The new machine would increase annual revenue by $170,000 and annual operating expenses by $75,000. The new machine would cost $420,000. The estimated useful life of the machine is 15 years with $7,500 salvage value. Required: 1. Compute accounting rate of return (ARR) of the machine using above information 2. Should Fine Clothing Factory purchase the machine if management wants an accounting rate of return of 20% on all capital investments? Problem Problem 2 Problem 3 Ready 7 8 9 Necuted PROTECTED VIEW Be careful files from the Internet can contain viruses. Unless you need to edit, es sales to stay in Protected View UPDATES AVAILABLE Updates for Office are ready to be installed, but first we need to close some apps Update now Brava Marie Hardy - 0 Enable F37 ting : x 1. Compute accounting rate of return (ARR) of the machine using above information 2. Should Fine Clothing Factory purchase the machine if management wants an accounting rate of return of 20% on all capital investments? (1): Computation of accounting rate of return: Accounting Rate of incremental income initial investment 0 1714 Incremental Income Increased income new machine increased expenses new machine New machine Depreciation incremental income Useful life Cost of new Machine less salvage value new less salvage value old (2) Conclusion: Problem 1 Problem 2 . Problem 3 Ready Esc 3 4 5 6 7 8 = 9 0 = (7 F en to close some apps. F25 Update now X A B C D E J K L M N O Accounting Rate of incremental income initial investment 0.1714 Incremental Income Increased income new machine increased expenses new machine New machine Depreciation incremental income Useful life Cost of new Machine less salvage value new less salvage value old (2) Conclusion: Problem 1 Problem 2. Problem 3 Ready @ N Y E R T u o p W G H