Metropolis Health Systems’ Laboratory Director expects to purchase a new piece of equipment. The assumptions for the transaction are as follows:
Average annual net income = $70,000
Original investment amount = $410,000
Unrecovered asset cost at the end of useful life (salvage value) = $41,000
(1) Compute the Unadjusted Rate of Return using the original investment amount.
(2) Compute the Unadjusted Rate of Return using the average investment method.