Determine the average rate of return on the equipment

Assignment Help Financial Management
Reference no: EM131489036

Average Rate of Return—New Product

Pocket Pilot Inc. is considering an investment in new equipment that will be used to manufacture a mobile communications device. The device is expected to generate additional annual sales of 6,800 units at $307.00 per unit. The equipment has a cost of $632,400, residual value of $47,600, and an eight-year life. The equipment can only be used to manufacture the device. The cost to manufacture the device is shown below.

Cost per unit:

Direct labor $52.00

Direct materials 201.00

Factory overhead (including depreciation) 34.00

Total cost per unit $287.00

Determine the average rate of return on the equipment. If required, round to the nearest whole percent.

_________________ %

Reference no: EM131489036

Questions Cloud

Whether the half-price offer is ethical business practice : Discuss whether customer "lock in" is an ethical business practice.
Option strategies has the greatest amount of investor risk : Which of the following option strategies has the greatest amount of investor risk?
What is the firms required rate of return : What is the firm's required rate of return?
Does the power company have a recognizable interest : Does the Power Company have a recognizable interest in Harry's land?
Determine the average rate of return on the equipment : Pocket Pilot Inc. is considering investment in new equipment that will be used to manufacture mobile communications device. Determine average rate of equipment
Concrete testing lab : CTL (Concrete Testing Lab) borrowed $40,000 for new equipment at 12% per year, compounded quarterly. How much principal is in the 6th payment?
Capital intensity different comparing to initial situation : Is the company's "capital intensity" the same or different comparing to initial situation?
What interest rate is the bank required by law to report : What interest rate is the bank required by law to report to potential borrowers?
What is future value in assuming an interest rate : What is the future value of $3901 in 13 years assuming an interest rate of 9.6 percent compounded semiannually?

Reviews

Write a Review

Financial Management Questions & Answers

  Calculate present value of the retirement benefit

Stan elects to receive his retirement benefit over 10 years at the rate of 2000 per month beginning one month from now. The monthly benefit increases by 5% each year. At an annual nominal interest rate of 6% compounded monthly, calculate the present ..

  Evaluating two different silicon wafer milling machines

You are evaluating two different silicon wafer milling machines. The Techron I costs $225,000, has a three-year life, and has pretax operating costs of $58,000 per year. The Techron II costs $395,000, has a five-year life, and has pretax operating co..

  What elements comprise capital structure

What elements comprise capital structure? What is the history on your company's growth? Look up the beta for your stock. How does your stock compare to the market?

  Credit card to relocate for his first job

A new employee charged $5140 on his credit card to relocate for his first job. After noticing that the interest rate for his balance was 24% compounded monthly, he stopped charging on that account. What monthly payment must he make to pay off the acc..

  Amount of the special payment that will be made to sasha

What is X, the amount of the special payment that will be made to Sasha in 4 years?

  What is the weighted average cost of capital for firm

WACC The current stock price for a company is $38 per share, and there are 4 million shares outstanding. The beta for this firms stock is 1, the risk-free rate is 4.2, and the expected market risk premium is 6%. If the corporate tax rate is 36%, what..

  Find terminal stock price using benchmark pe ratio

In practice, a common way to value a share of stock when a company pays dividends is to value the dividends over the next five years or so, then find the “terminal” stock price using a benchmark PE ratio. Suppose a company just paid a dividend of $1...

  Finding interest rates and lump sum to double

Finding Interest Rates & Lump Sum to Double. Your parents will retire in 26 years. They currently have $290,000 saved, and they think they will need $1,700,000 at retirement. What annual interest rate must they earn to reach their goal, assuming they..

  What should we expect to be the average number of people

To support National Heart Week, the Heart Association plans to install a free blood pressure testing booth in Franklin Park Mall for the week. Previous experience indicates that, on average, 6 persons per hour request a test. What should we expect to..

  Lending processes in order from most comfortable to least

With your understanding of the commercial lending processes, discuss your comfort level in participating in the financing efforts of a new business. Explain the lending processes in order from most comfortable to least. As an entrepreneur would you f..

  What was the closing price for this stock

You have found the following stock quote for RJW Enterprises, Inc., in the financial pages of today’s newspaper. 52-WEEK YLD VOL NET HI LO STOCK (DIV) % PE 100s CLOSE CHG 72.78 53.67 RJW 1.30 2.0 15 17,902 ?? − .38. What was the closing price for thi..

  Increase in cost of equipment at the beginning of project

To evaluate a proposed capital project effectively, it is important to understand the fundamental concept of incremental cash flows. Incremental cash flows can be viewed as cash flows: Holding all other variables constant, an increase in the cost of ..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd