Question: Exercise #4: Average rate of return The following data are accumulated by ChemLab Inc. in evaluating two competing capital investment proposals: Testing Equipment Vehicle Amount

Exercise #4: Average rate of return

The following data are accumulated by ChemLab Inc. in evaluating two competing capital investment proposals:

Testing Equipment

Vehicle

Amount of investment

$86,000

$30,000

Useful life

6 years

8 years

Estimated residual value

0

0

Estimated total income over the useful life

$18,060

$12,000

Instruction:

Determine the expected average rate of return for each proposal.

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