The following data are accumulated by Lone Peak Inc. in evaluating two competing capital investment proposals: 3D Printer Truck Amount of investment $40,000 $50,000 Useful life 7 years 10 years Estimated residual value $3,000 $6,000 Estimated total income over the useful life $24,080 $36,400 Determine the expected average rate of return for each proposal. If required, round to the nearest whole percent. 3D Printer % Truck %

Question

Elliott

Business

30 January, 18:40

The following data are accumulated by Lone Peak Inc. in evaluating two competing capital investment proposals: 3D Printer Truck Amount of investment $40,000 $50,000 Useful life 7 years 10 years Estimated residual value $3,000 $6,000 Estimated total income over the useful life $24,080 $36,400 Determine the expected average rate of return for each proposal. If required, round to the nearest whole percent. 3D Printer % Truck %

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Answers (1)

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Ismael Shelton · Answer 1

The answer is given below;

Explanation:

Average return on 3D printer=24,080 / (40,000-3,000) = 65%

Average return on truck amount=$36,400 / (50,000-6,000) = 83%

Average expected return on truck is higher as compared to 3D printer