ABC Company is considering the purchase of a new machine for $113,000. The machine would replace an old piece of equipment that costs $35,000 per year to operate. The new machine would cost $15,000 per year to operate. The old machine currently in use has no resale value. The new machine would have a useful life of ten years with zero salvage value. ABC Company employs a cost of capital of 14% on all capital projects. The accounting rate of return on the new machine is closest to:

Question 2 options:

A)

20.9%

B)

17.7%

C)

15.9%

D)

7.7%

E)

30.9%