Question
A company is planning to purchase a machine that will cost $25,200, have a six-year life, and be depreciated over a six-year period with no
A company is planning to purchase a machine that will cost $25,200, have a six-year life, and be depreciated over a six-year period with no salvage value. 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?
Sales $ 110,000
Costs:
Manufacturing $ 51,700
Depreciation on machine 4,200
Selling and administrative expenses 50,000 (105,900 )
Income before taxes $ 4,100
Income tax (30%) (1,230 )
Net income $ 2,870
Multiple Choice
33.33%.
4.20%.
50.00%.
22.78%.
11.39%.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started