The following data are accumulated by Eco Labs, Inc. in evaluating two competing capital investment proposals:
Testing Equipment | Vehicle | ||||
Amount of investment | $68,000 | $92,000 | |||
Useful life | 4 years | 7 years | |||
Estimated residual value | 0 | 0 | |||
Estimated total income over the useful life | $6,800 | $30,590 |
Determine the expected average rate of return for each proposal. If required, round your answers to one decimal place.
Testing Equipment | % |
Vehicle | % |
Expected average rate of return = Average income/Average investment
testing equipment = (6800/4)/34000 = 5%
Vehicle = (30590/7)/46000 = 9.5%
The following data are accumulated by Eco Labs, Inc. in evaluating two competing capital investment proposals:...
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