Zuheir Company wants to produce and sell a new product at a selling price of $70, a variable cost of $18, and an estimated annual fixed manufacturing cost of $180,000 (all cash). The company expects to sell 10,000 units in year 2021. In order to produce the new product, the company must purchase a new machine at a cost of $800,000 with a 5 year estimated useful life.

What is the accrual accounting rate of return (AARR) if income tax rate is 30% and the company uses the straight-line depreciation?

Select one: a. 42.50% b. 20% c. 15.75% d. 35.75%

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