Rainbow painting company is considering whether to purchase a new spray paint machine that costs $8,000. the machine is expected reduce labor costs by $1,600 per year. the machine is expected to have a useful life of 10 years. the unadjusted rate of return for this investment is

Question

Amari Richard

Business

10 August, 05:48

Rainbow painting company is considering whether to purchase a new spray paint machine that costs $8,000. the machine is expected reduce labor costs by $1,600 per year. the machine is expected to have a useful life of 10 years. the unadjusted rate of return for this investment is

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Karter Singh · Answer 1

The unadjusted rate of return for this investment is 10% ((1600-8000/10) / 8000 * 100%) based on the information shown in the question above. The unadjusted rate of return can be found with this formula (income from asset/investment for fixed asset). The income from the fixed asset is the difference between the benefit it gives and the depreciation expense.