Question

Payback, Accounting Rate of Return, Net Present Value, Internal Rate of Return Blaylock Company wants to...

Payback, Accounting Rate of Return, Net Present Value, Internal Rate of Return

Blaylock Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of trenching machines. The outlay required is $800,000. The NC equipment will last five years with no expected salvage value. The expected after-tax cash flows associated with the project follow:

Year      Cash Revenues      Cash Expenses
1 $1,600,000 $1,308,000
2 1,600,000 1,308,000
3 1,600,000 1,308,000
4 1,600,000 1,308,000
5 1,600,000 1,308,000

Required:

Compute the NC equipment’s ARR. Enter as a percent and round your answer to one decimal place.
Accounting rate of return =  %

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