A company is considering the purchase of new equipment for $480,000. The equipment will have a useful life of 4 years and no salvage value. The company estimates that the new equipment will provide $30,000 of after-tax net income each year after deducting $120,000 of annual depreciation expense. What is the accounting rate of return (ARR) for the new equipment?

Select one:

a.

31.25%.

b.

62.5%.

c.

16%.

d.

12.5%.

e.

6.25%.