Question

Suppose francine duckelberg’s sweets is considering investing in warehouse management software $550000, has $75000, residential value...

Suppose francine duckelberg’s sweets is considering investing in warehouse management software $550000, has $75000, residential value and should lead to cost savings of $130000 per year for its five year life. What is the accounting rate of return?
Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
Accounting rate of return is the ratio of estimated accounting profit of a project to the average investment made in the project.
APR = Average accounting profit / Average Investment
Annual Depreciation = (Initial Investment ? Scrap Value) ÷ Useful Life in Years
Annual Depreciation = ($550000 ? $75000) ÷ 5 Years = $95,000
Average accounting income = Yearly cost savings - depreciation = $130000 - $95000 = $35,000
APR = Average accounting profit / Average Investment = $35000 / $550000 = 6.36%
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Question 12 (a) A hotel has undergone renovations and is considering which revenue management software system...
Question 12 (a) A hotel has undergone renovations and is considering which revenue management software system to adopt. The system is meant to optimize the pricing and availability of the hotel’s rooms. The two market leading revenue management software systems are Opera by Oracle and RoomMaster by InnQuest and the hotel has to adopt one. Opera costs £1 million and will increase the operating profits by £500,000 per year. Its useful life is 5 years and it is estimated to...
XYZ Company is considering building a new warehouse in Yas. It will require an initial capital...
XYZ Company is considering building a new warehouse in Yas. It will require an initial capital investment of $ 10 000. The investment will have a three-year life, and will be depreciated on a straight line basis to a zero book value over the next three years. The new project will generate the following net income over each of the next three years for the company:    Year Expected Net Income ($) 1 500 2 1,000 3 1,500 Calculate the...
Net Present Value Method The management of Minces Company, a wholesale distributor of cracker products, is...
Net Present Value Method The management of Minces Company, a wholesale distributor of cracker products, is considering the purchase of a $30,000 machine that would reduce operating costs in its warehouse by $5,000 per year. At the end of the machine's eight-year useful life, it will have no scrap value. The company’s required rate of return is 11%. Required: (Ignore income taxes.) Determine the net present value of the investment in the machine. What is the difference between the total...
A company is considering investing in a piece of machinery that will cost $550,000. It will...
A company is considering investing in a piece of machinery that will cost $550,000. It will provide an additional $160,000 in sales each year and its annual cash operating expenses are expected to be $52,000. Management plans to depreciate the machine on a straight-line basis over a 10-year life with no estimated salvage value. The company has a 40% tax rate. How much is net annual operating cash flow expected if the machinery is acquired?
Accounting Rate of Return WeCare Clinic is planning on investing in some new echocardiogram equipment that...
Accounting Rate of Return WeCare Clinic is planning on investing in some new echocardiogram equipment that will require an initial outlay of $155,000. The system has an expected life of five years and no expected salvage value. The investment is expected to produce the following net cash flows over its life: $80,000, $70,000, $84,000, $83,000, and $92,000. Required: 1. Calculate the annual net income for each of the five years. Net Income Year 1 $ __________ Year 2 $___________ Year...
C.M. Burns Enterprises, Inc. is considering investing in a machine to produce computer keyboards. The price...
C.M. Burns Enterprises, Inc. is considering investing in a machine to produce computer keyboards. The price of the machine will be $400,000 and its economic life five years. The machine will be fully depreciated by the straight-line method. The machine will produce 10,000 units of keyboards each year. The price of each keyboard will be $40 in the first year, and it will increase at 5% per year. The production cost per unit of the keyboard will be $20 in...
C.M. Burns Enterprises, Inc. is considering investing in a machine to produce computer keyboards. The price...
C.M. Burns Enterprises, Inc. is considering investing in a machine to produce computer keyboards. The price of the machine will be $400,000 and its economic life five years. The machine will be fully depreciated by the straight-line method. The machine will produce 10,000 units of keyboards each year. The price of each keyboard will be $40 in the first year, and it will increase at 5% per year. The production cost per unit of the keyboard will be $20 in...
Lakeside Inc. is considering replacing old production equipment with state-of-the-art technology that will allow production cost...
Lakeside Inc. is considering replacing old production equipment with state-of-the-art technology that will allow production cost savings of $10,000 per month. The new equipment will have a five-year life and cost $420,000, with an estimated salvage value of $30,000. Lakeside’s cost of capital is 8%. Lakeside Inc. uses a straight-line depreciation method. Required: Calculate the payback period and the accounting rate of return for the new production equipment. (Round your answers to 2 decimal places.)
Dickinson Brothers, Inc., is considering investing in a machine to produce computer keyboards. The price of...
Dickinson Brothers, Inc., is considering investing in a machine to produce computer keyboards. The price of the machine will be $982,000, and its economic life is five years. The machine will be fully depreciated by the straight-line method. The machine will produce 27,000 keyboards each year. The price of each keyboard will be $40 in the first year and will increase by 6 percent per year. The production cost per keyboard will be $15 in the first year and will...
A retailer is considering inventory management of one of its products with the annual demand of...
A retailer is considering inventory management of one of its products with the annual demand of 600 units (1 year = 50 weeks). The product is delivered directly from the manufacturer who guarantees that every order is delivered in 2 weeks. The retailer pays the manufacturer $150 per unit. Additionally, every time the manufacturer fills an order from the retailer, machine setup cost of $60 is charged on the retailer. Transportation from the manufacturer costs the retailer $40 per shipment...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT