Asked by
jacob jones
on Nov 17, 2024
Verified
A company is planning to purchase a machine that will cost $24,000, have a 6-year life, and have no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. Total operating income generated over the life of the machine is estimated to be $12,000. The machine will generate net cash inflows of $6,000 per year. The average rate of return for the machine is 50%.
Salvage Value
The estimated residual value of an asset at the end of its useful life, often used for depreciation calculations.
Total Operating Income
The profit achieved from a company's core business operations, excluding deductions of taxes and interest.
Net Cash Inflows
The amount by which the cash inflow from operations exceeds its cash outflow, usually measured within a specific period.
- Acquire the ability to delineate and compute the average rate of return, along with comprehending its importance.
- Determine the projected average rate of return on capital expenditures.
- Understand how depreciation impacts cash flow and investment analysis.
Verified Answer
ES
Learning Objectives
- Acquire the ability to delineate and compute the average rate of return, along with comprehending its importance.
- Determine the projected average rate of return on capital expenditures.
- Understand how depreciation impacts cash flow and investment analysis.
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