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The manager of Malan Pty Ltd wants to buy a new machine to replace the one currently being used. The new machine will cost
The manager of Malan Pty Ltd wants to buy a new machine to replace the one currently being used. The new machine will cost $100 000 with no disposal value at the end of a five-year useful life. The manager estimates that the machine will reduce annual operating costs by $30 000. Depreciation allowed for tax purpose will be $20 000 per year for five years. The tax rate for each year is expected to be 20 per cent and the company's after-tax required rate of return is 12 per cent. What is the after-tax accounting rate of return computed based on the initial investment? Select one! Ca. 89 b. 20% C.10% d. 4%
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