Helicopter Gear is planning to expand its product line, which requires investmen

Question

Helicopter Gear is planning to expand its product line, which requires investment of $549,500 in special-purpose machinery. The machinery has a useful life of seven years and no salvage value. The estimated annual results of offering the new products are as follows: Revenue $ 524,500 Expenses (Including straight-line depreciation) (498,800 ) Increase in net income $ 25,700 All revenue from the new products and all expenses (except depreciation) will be received or paid in cash in the same period as recognized for accounting purposes. The return on average investment for this proposed investment is closest to 4.68%. 37.93%. 4.90%. 9.35%.

Explanation / Answer

A. 4.68%

The return on average investment for this proposed investment is closest to:

= $25,700 / $549,500

= 4.68%

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