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Reynold company is considering an investment of $130,000 in new equipment. The new equipment is expected to last 5 years. It will have zero salvage
Reynold company is considering an investment of $130,000 in new equipment. The new equipment is expected to last 5 years. It will have zero salvage value at the end of its useful life. Reynolds uses the straight-line method of depreciation for accounting purposes. The expected annual revenues and costs of the new product that will be product from the investment are:
Sales revenue $200,000
Less: Costs and Expenses 180,000
Income before income taxes $ 20,000
Income tax expense 7,000
Net Income $13,000
Computing Average Investment and Computing Expected Annual Rate of Return. Valor 20 points.
Average Investment = $65,000
Expected Annual rate of return= 20%
Average Investment = $60,000
Expected Annual rate of return= 18%
Average Investment = $85,000
Expected Annual rate of return= 30%
Average Investment = $75,000
Expected Annual rate of return= 40%
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