Question
In: Accounting
PLEASE DO PROBLEM A machine costs $600,000 and is expected to yield an after-tax net income...
PLEASE DO PROBLEM
A machine costs $600,000 and is expected to yield an after-tax
net income of $23,000 each year. Management predicts this machine
has a 10-year service life and a $120,000 salvage value, and it
uses straight-line depreciation. Compute this machine’s accounting
rate of return.
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Solutions
Expert Solution
| Machine Cost | 6,00,000 |
| Expected Yield | 23,000 |
| Machine life | 10 |
| Salvage Value | 1,20,000 |
| Accounting Rate of Return | |
| Annual after-tax net income / Annual average investment | |
| 23000 / 600000 *100 | 3.83 |
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