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Determine the average rate of return on the equipment

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Problem - Average rate of return-cost savings - Sager Industries is considering an investment in equipment that will replace direct labor. The equipment has a cost of $1,200,000 with a $300,000 residual value and a 10 -year life. The equipment will replace three employees who has an average total wages of $180,000 per year. In addition, the equipment will have operating and energy costs of $7,500 per year.

Required - Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment.

Reference no: EM132706925

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