Alpha IncIs Evaluating the Purchase of a Machine Costing $350,000

question 108

Multiple Choice

Alpha Inc.is evaluating the purchase of a machine costing $350,000.The expected useful life of the machine is 5 years at the end which it would have no residual value, and the depreciation is assumed to be on straight-line basis.The estimated total income from the machine is $500,000.The expected average rate of return for this machine is:

• A) 26.4%.
• B) 42.6%.
• C) 38.5%.
• D) 57.1%.

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Definitions:

Just-in-Time

A production strategy that strives to improve a business's return on investment by reducing in-process inventory and associated carrying costs.

Service Sector

The segment of the economy that produces intangible goods, such as services rather than physical products, including industries like healthcare, education, and finance.

Labour-intensive

Describing industries or processes that require a large amount of manual labor input compared to capital investment.

Automate

The use of technology to perform tasks with minimal human intervention, often to increase efficiency and reliability.