You have the following information about three electronic sales registers that are in the market. The owner of a restaurant asks for your help in deciding which of the three machines to buy.

Assume a 30% income tax rate and straight-line depreciation.

a. Use the ARR method to decide which of the three machines would be the best investment.

b. If the restaurant owner wants a return on investment of at least 10%, what would you advise?LO1

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Register A Register B Register C Cash investment required $6,300 Estimated machine life 5 years $6,000 5 years $6,700 5 years Estimated residual trade-in value (at the end of 5 years) $ 500 -0- $ 300 Annual operating costs $ 400 $ 300 $ 300 (excluding depreciation) Annual savings before deduction of costs $2,000 $2,000 $2,000