Ans. 1 | Depreciation expense = (Cost of machine - Residual value) / Useful life in years | |||
($43,000 - $0) / 10 | ||||
$4,300 | ||||
Ans. 2 | Particulars | Amount | ||
Operating cost of old machine | $11,000 | |||
Less: Operating cost of new bottling machine | -$5,000 | |||
Less: Depreciation expenses on new machine | -$4,300 | |||
Incremental net operating income | $1,700 | |||
Ans. 3 | Initial investment = Cost of new machine - Salvage value of old machine | |||
$43,000 - $18,000 | ||||
$25,000 | ||||
Ans. 4 | Simple rate of return = Incremental net operating income / Initial investment | |||
$1,700 / $25,000 | ||||
6.80% | ||||
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