Steadman Company is considering an investment in a new machine for an independent five-year project. The machines cost is $500,000 with no salvage value at the end of five years. Net cash inflows from the project are expected to be $140,000 annually. Steadman would depreciate the machine using the NACRS schedule, and the machine qualifies as a five-year asset. Steadman uses a discount rate of 8%, and its tax rate is 30%.

Determine the book (accounting rate of return using both (a) the initial investment ats the denominator and (b) the average book value of the investment as the denominator.

Please show all calculations.

EXHIBIT 12.4 MACRS Depreciation Rates Year 3-year 5-year 7-year 10-year 15-year 20-year 1 33.33 20.00 14.29 10.00 5.00 3.75 2 44.45 32.00 24.49 18.00 9.50 7.22 3 14.81 19.20 17.49 14.40 8.55 6.68 4 7.41 11.52* 12.49 11.52 7.70 6.18 5 11.52 8.93* 9.22 6.93 5.71 6 5.76 8.92 7-37 6.23 5.28 7 8.92 6.55* 5.90* 4.89 8 4.47 6.55 5.90 4.52 9 6.56 5.91 4.46* 10 6.55 5.90 4.46 11 3.28 etc. etc