micro tek inc. is considering an investment in new equipment that will be used to manufacture a smartphone. the phone is expected to generate additional annual sales of 4,000 units at $450 per unit. the equipment has a cost of $940,000, residual value of $20,000, and an eight-year life. the equipment can only be used to manufacture the phone. the cost to manufacture the phone follows:

What it means to invest is to make a current financial commitment in the hopes of future growth. The use of capital—such as time, money, effort, etc.—with the hope of receiving a return higher than the initial investment is known as investing.

How do novice investors make purchases?

Depositing funds into an internet interest bearing account, which can later be used to purchase shares of stock in share collective investment schemes, is one of the greatest ways for novice investors to learn how to invest in stocks. You may frequently open a brokerage account and begin investing for the cost of one share.

Briefing:

Annual operating income = Sales - Manufacturing cost

= (4,000 × $450) - (4,000 × $264)

= $744,000

Average investment = (Initial cost + Residual value) ÷ 2

= ($940,000 + $20,000) ÷ 2

= $480,000

Average rate of return = Average annual operating income ÷ Average investment

= $744,000 ÷ $480,000

= 155%

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