Quip Corporation wants to purchase a new machine for $300,000. Management predicts that the machine will produce sales of $200,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. The firm uses straight-line depreciation with an assumed residual (salvage) value of $50,000. Quip's combined income tax rate, t, is 40%.

Required:

a) What is the annual accounting (book) rate of return (ARR) for the proposed investment, based on the initial investment? (Round answer to nearest whole percentage).

A) 12%. B) 14%. C) 17%. D) 20%.

b) 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).

A) 12%. B) 14%. C) 17%. D) 24%

Please show all work if possible! (: