What replacement return on his capital investment will the o

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Reference no: EM131061586

The owner of a small antifreeze plant has a small canning unit which cost him $5000 when he purchased it 10 years ago. The unit has completely depreciated, but the owner estimates that it will still give him good service for 5 more years. At the end of 5 years the unit will be worth a junk value of $100. The owner now has an opportunity to buy a more efficient canning unit for $6000 having an estimated service life of 10 years and zero salvage or junk value. This new unit would reduce annual labor and maintenance costs by $1000 and increase annual expenses for taxes and insurance by $100. All other expenses except depreciation would be unchanged. If the old canning unit can be sold for $600, what replacement return on his capital investment will the owner receive if he decides to make the replacement?

Reference no: EM131061586

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