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A company is planning to purchase a machine that will cost $31,800 with a six-year life and no salvage value. The company uses straight-line depreciation.
A company is planning to purchase a machine that will cost $31,800 with a six-year life and no salvage value. The company uses straight-line depreciation. The company expects to sell the machine's output of 3.000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below. What is the accounting rate of return for this machine? $100,000 Sales Costs: Manufacturing Depreciation on machine Selling and administrative expenses Income before taxes Income tax (35%) Net income $50,700 5,300 40,000 (96,000) $ 4,000 (1,400) $ 2,600 5.30%. 33.33% 50.00% 16.35% ho 8.18%
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