A machine costs $200,000 and is expected to yield an after-tax net income of $5,040 each year.

Question:

Management predicts this machine has a 12-year service life and a $40,000 salvage value, and it uses straight-line depreciation. Compute this machine’s accounting rate of return.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...