Description
A company is considering the purchase of a new machine for $27,200. Management predicts that the machine can produce sales of $10,400 each year for the next 10 years. Expenses are expected to include direct materials, direct labor, and factory overhead totaling $5,300 per year plus depreciation of $2,800 per year. The company's tax rate is 40%. What is the approximate accounting rate of return for the machine? |
Explanation & Answer
Hi there! Thank you for the opportunity to help you with your question!
The accounting income is given by (10400 - (5300+2800)) = 2300
Yearly, that averages out to 2300/10 = 230
Considering tax: 230 * 60% = 138
Divide it by initial investment for ARR: 138/27200 = 0.51%
Please let me know if you need any clarification. Always glad to help!Review
Review
24/7 Homework Help
Stuck on a homework question? Our verified tutors can answer all questions, from basic math to advanced rocket science!
Similar Content
Related Tags
To Kill a Mockingbird
by Harper Lee
How to Win Friends and Influence People
by Dale Carnegie
Othello
by Wiliam Shakespeare
The Life-Changing Magic of Tidying Up
by Marie Kondo
Too Much and Never Enough
by Mary L. Trump
The Tipping Point
by Malcolm Gladwell
The Age Of Light
by Whitney Scharer
Breakfast at Tiffanys
by Truman Capote
The Magic Mountain
by Thomas Mann