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A) Toronto Steel Manufacturing Inc. is considering the purchase of a new machine. Its cost is $30,000; its expected useful life is 10 years (assume
A) Toronto Steel Manufacturing Inc. is considering the purchase of a new machine. Its cost is $30,000; its expected useful life is 10 years (assume no salvage value), and it will be depreciated on a straight-line basis i.e. $3,000 per year. The income before depreciation and taxes is expected to be $15,000 per year. Assuming a 40% tax rate. You are required to compute the (A) payback period and (B) the accounting rate of return.
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