a. A proposal to purchase a new machine is being considered by the management of the Kappa manufacturing company. The new machine would increase production and revenues. Kappa uses the accounting rate of return method to evaluate capital investments like this. The relevant data is given below: Cost of new machine: $1,200,000 Useful life of the machine: 10 years Expected annual cash inflows associated with the new machine: $450,000 Operating expenses associated with the new machine: $26,000 Salvage value of the machine at the end of 10-year period: $80,000 The expected annual cash inflows given above is the only revenue that the new machine will generate. The operating expenses of $26,000 given above do not include the annual depreciation of the machine. Kappa company uses a straight-line method of depreciation to depreciate all of its plant assets. Required: Compute the simple rate of return of the machine. Would Kappa company purchase the machine if its desired accounting/simple rate of return is 20%?