A manufacturer is considering whether to invest in a robotic system that costs $600,000, has a $40,000 residual value, and should lead to cost savings of $150,000 per year for its five-year life. In calculating the accounting rate of return (ARR), which of the following numbers should be used in the ARR equation’s numerator as average annual operating income?
a. $8,000

b. $30,000

c. $38,000

d. $112,000