Jamison Specialties manufactures programmable incremental encoders that resist shock and vibration for use in harsh environments. Five

Question:

Jamison Specialties manufactures programmable incremental encoders that resist shock and vibration for use in harsh environments. Five years ago, the company invested $650,000 in an automated quality control system and recorded savings of $105,000 per year for the 5 years. The equipment now has a salvage value of $50,000.

(a) What is the rate of return per year on the investment?

(b) The owner expected to make at least 15% per year on this quality improvement investment. What annual savings were necessary to meet the 15% goal?

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...

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