Group Greece has an opportunity to purchase $2 million lab equipment. The equipment has an economic life of 5 years and will be worthless after that time. It will generate net income of $100,000 one year from today and the income stream will grow at 7% per year thereafter. The company uses straight-line depreciation (i.e., equal depreciation each year). What is the average accounting return of the investment? should the lab equipment be purchased if Group Greeces average accounting return cutoff is 20%?

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