Competing capital investment proposals

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Reference no: EM13122573

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

Amount of investment Testing equipment: 80,000 Vehicle 28,000
Useful Life Testing equipment: 6 years Vehicle 8 years
Estimated residual value Testing equipment 0 Vehicle 0
Estimated total income over the useful life: Testing equipment 13,200 Vehicle 14,000

1. On exercise 10-1, what is the expected average rate of return for testing equipment?

5.5%
12.5%
18.5%
21.5%

2. On exercise 10-1, what is the expected average rate of return for the vehicle?

8.75%
12.5%
25%
28.5%

Reference no: EM13122573

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