Hammer Corporation wants to purchase a new machine for $286,000. Management predicts that the machine will produce sales of $206,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $81,000 per year. The firm uses straight-line depreciation with an assumed residual (salvage) value of $50,000. Hammer's combined income tax rate, t, is 30%.

What is the estimated accounting (book) rate of return (ARR) for the proposed investment, based on average investment? (Round answer to nearest whole number/percentage.)

Multiple Choice

• 20%.

• 22%.

• 25%.

• 32%.

• 42%.