Your company is evaluating the purchase of a revolutionary new machine, which will increase manufacturing efficiency and increase company profits over its 3-year lifespan.The company bookkeeper advises that the company's cost of capital is 12% and that any new projects should only be approved if their Accounting Rate of Return exceeds 12%.

Investment Cash profits Salvage before Time Date Value Depreciation 0 1-Jan-21 (S 90,000) 1 31-Dec-21 36,000 2 31-Dec-22 36,000 3 31-Dec-23 $ 6,000 36,000