A company buys a machine for $80,000 that has an expected life of 10 years and no salvage value. The company uses straight-line depreciation. The company anticipates a yearly net income of $3,850 after taxes of 14%, with the cash flows to be received evenly throughout each year. What is the accounting rate of return?   a) 4.81% b) 8.28% c) 1.35% d) 9.63% e) 48.13%

EBK CONTEMPORARY FINANCIAL MANAGEMENT
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Chapter10: Capital Budgeting: Decision Criteria And Real Option
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A company buys a machine for $80,000 that has an expected life of 10 years and no salvage value. The company uses straight-line depreciation. The company anticipates a yearly net income of $3,850 after taxes of 14%, with the cash flows to be received evenly throughout each year. What is the accounting rate of return?

 

a) 4.81%

b) 8.28%

c) 1.35%

d) 9.63%

e) 48.13%

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