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9 October, 15:09

A company is planning to purchase a machine that will cost $29,400 with a six-year life and no salvage value. The company uses straight-line depreciation. The company expects to sell the machine's output of 3,000 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 ... $117000

Cost:

Manufacturing ... $52,000

Depreciation on machine ... 4900

Selling and administrative expenses ... 39,000 96,800

Income before Tax ... 20,200

Income Tax (40%) ... 8080

Net Income ... $12,120

a. 6.00 years

b. 4.85 years.

c. 2.43 years.

d. 173 years.

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Answers (1)
  1. 9 October, 17:38
    0
    It might be a:6.00 years
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