accounting rate of return based on initial investment?
The Mellow Machine Company is considering the addition of a computerized lathe to its equipment inventory. The initial cost of the equipment is P600,000, and the lathe is expected to have a useful life of five years and no salvage value. The cost savings and increased capacity attributable to the machine are estimated to generate increases in the firm’s annual
Year |
Depreciation |
1 |
P200,000 |
2 |
266,700 |
3 |
88,860 |
4 |
44,440 |
Mellow is currently in the 40 percent tax bracket. A 10 percent after-tax
What is the accounting rate of return based on initial investment?
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