Answered: а. 4.75% с. 2.85% е. 6.65% b. 42.75% d.…

Business

Accounting

а. 4.75% с. 2.85% е. 6.65% b. 42.75% d. 9.50%

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

A company buys a machine for $180,000 that has an expected life of nine years and no salvage value. The company expects an annual net income (after taxes of 30%) of $8,550. What is the accounting rate of return?

а. 4.75%
с. 2.85%
е. 6.65%
b. 42.75%
d. 9.50%

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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