A company is planning to purchase a machine that will cost 240,000, have a six-year life, and be depreciated over a six-year period with no salvage value. The company expects to sell the machine's output of 30,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below. What is the accounting rate of return for this machine? Sales Costs: 900,000 Manufacturing 520,000 Depreciation on machine 40,000 Selling and administrative expenses 300,000 (860,000) Income before taxes 40,000 Income tax (25%) (10,000) Net Income 30,000 Choices: 4% 8% 16.7% 25% 12.5%
A company is planning to purchase a machine that will cost 240,000, have a six-year life, and be
Sales Costs: 900,000
Manufacturing 520,000
Depreciation on machine 40,000
Selling and administrative expenses 300,000 (860,000)
Income before taxes 40,000
Income tax (25%) (10,000)
Net Income 30,000
Choices:
- 4%
- 8%
- 16.7%
- 25%
- 12.5%
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