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Average Rate of Return-Cost Savings Midwest Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $139,000 with a $12,000 residual value and a ten-year life. The equipment will replace one employee who has an average wage of $24,715 per year. In addition, the equipment will have operating and energy costs of $6,730 per year Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment. If required, round to the nearest whole percent Average Rate of Return-New Product Galactic 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 4,200 units at $253 per unit. The equipment has a cost of $429,700, residual value of $32,300, and an eight-year life. The equipment can only be used to manufacture the phone. The cost to manufacture the phone follows: Cost per unit: Direct labor $44.00 Direct materials 170.00 Factory overhead (including depreciation) 28.55 Total cost per unit $242.55 Determine the average rate of return on the equipment. If required, round to the nearest whole percent % Average Rate of Return The following data are accumulated by Lone Peak Inc. in evaluating two competing capital investment proposals: 3D Printer Truck Amount of investment $20,000 $48,000 4 years 5 years Useful life Estimated residual value 0 0 Estimated total income over the useful life $6,240 $5,750 Determine the expected average rate of return for each proposal. If required, round your answers to one decimal place. 3.3 % 3D Printer Truck 5.8 X %

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