2-7Payback period, accounting rate of uy a new machine with special purpose 1)One million $ Dollars for the produc E the machine is (10) years, bearing in e machine at the end of its useful life ethod in calculating the depreciation, an om operating the machine will be 1,20C seludino 700 00 0 S Dol llore If

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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22-7Payback period, accounting rate of return on investment Al-Baida wants to
buy a new machine with special purposes for an amount
(1)One million $ Dollars for the production of a product, and the economic life
of the machine is (10) years, bearing in mind that there is no residual value for
the machine at the end of its useful life. The company adopts the straight-line
method in calculating the depreciation, and it is expected that the annual revenues
from operating the machine will be 1,200,000 $ Dollars, and the annual expenses
excluding taxes, 700,000 $ Dollars. If you know that the company adopts a
discount rate of 12%. The income tax rate is 30% for all years.
Required: Calculate the following:
1. The payback period.
2. The rate of accounting return on investment .
Transcribed Image Text:22-7Payback period, accounting rate of return on investment Al-Baida wants to buy a new machine with special purposes for an amount (1)One million $ Dollars for the production of a product, and the economic life of the machine is (10) years, bearing in mind that there is no residual value for the machine at the end of its useful life. The company adopts the straight-line method in calculating the depreciation, and it is expected that the annual revenues from operating the machine will be 1,200,000 $ Dollars, and the annual expenses excluding taxes, 700,000 $ Dollars. If you know that the company adopts a discount rate of 12%. The income tax rate is 30% for all years. Required: Calculate the following: 1. The payback period. 2. The rate of accounting return on investment .
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