Question
Your firm is considering purchasing a machine with the following annual, end-of-year, book investment accounts. Purchase Date Year 1 Year 2 Year 3 Year 4
Your firm is considering purchasing a machine with the following annual, end-of-year, book investment accounts.
| Purchase Date | Year 1 | Year 2 | Year 3 | Year 4 | |||||||||||||||
| Gross investment | $ | 69,000 | $ | 69,000 | $ | 69,000 | $ | 69,000 | $ | 69,000 | |||||||||
| Less: Accumulated depreciation | 0 | 17,250 | 34,500 | 51,750 | 69,000 | ||||||||||||||
| Net investment | $ | 69,000 | $ | 51,750 | $ | 34,500 | $ | 17,250 | $ | 0 | |||||||||
The machine generates, on average, $5,700 per year in additional net income. What is the average accounting return for this machine? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) AAR %
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Investment Science
Authors: David G. Luenberger
1st Edition
0195108094, 978-0195108095
