Question

A machine costs $300,000 and is expected to yield an after-tax net income of $9,000 each...

A machine costs $300,000 and is expected to yield an after-tax net income of $9,000 each year. Management predicts this machine has a 9-year service life and a $60,000 salvage value, and it uses straight-line depreciation. Compute this machine’s accounting rate of return.

Accounting Rate of Return
Choose Numerator: / Choose Denominator: = Accounting Rate of Return
/ = Accounting rate of return
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Answer #1

Answer:

Numerator / Denominator = Accounting rate of return
Average Income / Average Investment = Accounting rate of return
$               9,000 / $                  180,000 = 5.00%

Calculations:

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