Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. the following data are accumulated by eco labs, in

The following data are accumulated by Eco Labs, Inc. in evaluating two competing capital investment proposals: Testing...

Free

60.1K

Verified Solution

Question

Accounting

The following data are accumulated by Eco Labs, Inc. inevaluating two competing capital investment proposals:

Testing EquipmentVehicle
Amount of investment$56,000$40,000
Useful life4 years5 years
Estimated residual value00
Estimated total income over the useful life$8,400$10,500

Determine the expected average rate of return for each proposal.If required, round your answers to one decimal place.

Testing Equipment%
Vehicle%

Answer & Explanation Solved by verified expert
3.8 Ratings (626 Votes)

Average rate of return for testing Equipment:

Formula for average rate of return = Estimated total income per annum/Average investment

         Estimated total income per annum = $ 8400/4

                                                                    = $ 2100

Average investment = (Investment – salvage value)/2

                                 = ($56,000-0)/2 = $28000

ARR = $ 2100 / $ 28000 = 7.50%

Average rate of return for testing Equipment:

Estimated total income per annum = $10500/5

                                                        = $2100

Average investment = $40,000/2 = $20,000

            ARR = $2100/$20,000

                     = 10.50%
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Finance
1.2K views

??? Consider a bond that pays $50 semi-annual interest and has a remaining life of 10 years....

Finance
1.2K views

firm’s stock has a 0.2 possibility to make 40.00% return, a 0.50 chance to make 10%...

Economics
1.2K views

INFLATION AND THE PHILLIPS CURVE explain with your own words 1 What is the Phillips curve? 2 What...

Basic Math
1.2K views

Rationalize the denominator:-9/4 + ?2

Calculus
1.2K views

11 Which of the following is an equation of an ellipse A 3x y 2...

Algebra
1.2K views

5 5 Given the matrix A and vector b determine the Least Squares solution of...

Accounting
1.2K views

1 John Jones calculates that this year's estimated bad debts expense will be $13 800....

Accounting
1.2K views

Assume the following costs were incurred during Bene Petit's first year of operations

Accounting
1.2K views

Specific Identification, FIFO, LIFO, and Weighted-Average Swing Company's beginning inventory and purchases...

Accounting
1.2K views

On July 1,2024, Gupta Corporation bought 25% of the outstanding common stock of VB Company...

Accounting
1.2K views

(ii) Employees of a particular garment factory contracted COVID19 during the course of their employment....

Finance
1.2K views

You have $5,878 in your savings account today that you want to grow to $17,971...