Watson Corporation is considering buying a machine for $45,000. Its estimated useful life is 5 years, with no salvage value. Watson anticipates annual net income after taxes of $1,800 from the new machine. What is the accounting rate of return assuming that Watson uses straight-line depreciation and that income is earned uniformly throughout each year?

Multiple Choice

• 4.0%.

• 5.3%.

• 5.0%.

• 6.7%.

• 8.0%.