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2. Accounting Rate of Return (ARR) =

  • Total cost of unit x replacement number
  • Total annual profit / Average annual investment x 100
  • Net profit per unit x replacement number
  • Total anual profit x life time until replacement (yrs) / life time until replacement (yrs)

3. Average annual profit =

  • Investment cost + total disposal value / 2
  • Total anual profit x life time until replacement (yrs) / life time until replacement (yrs)
  • Net profit per unit x replacement number
  • Total annual profit / Average annual investment x 100
  • Total cost of unit x replacement number

4. Investment in new machinery - cash flow graph (Should investment be taken)

  • Years (Horizontal); Vertical - Capital expenditure; Savings; Disposal; Net cash flow; Discount factor; Present value = Net presnt value
  • Years (Vertical); Horizontal - Capital expenditure; Savings; Disposal; Net cash flow; Discount factor; Present value = Net presnt value

5. Total disposal value =

  • Sale value per unit x replacement number
  • Investment cost + total disposal value / 2
  • Total annual profit / Average annual investment x 100
  • Net profit per unit x replacement number

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