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On January 1, 2017, Sanford, Inc. plans to purchase a machine for $68,000 that has an estimated salvage value of $12,000, and an estimated life
On January 1, 2017, Sanford, Inc. plans to purchase a machine for $68,000 that has an estimated salvage value of $12,000, and an estimated life of 4 years. The machine is expected to generate the following cash flows and income over the next 4 years:
2017 2018 2019 2020
Net Income $12,500 $10,300 $13,000$2,000
Operating Cash Flows $26,500 $24,300 $27,000 $16,000
Sanford's required rate of return is 9.5%, and the cost of capital is 7.5%. How much is the accounting rate of return?
A 33.75%
B 94.50%
C 23.63%
D 58.63%
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