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Oakland Shop Is Considering the Purchase of a Used Printing

question 163

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Oakland Shop is considering the purchase of a used printing press costing $9,600. The printing press would generate a net cash inflow of $4,000 per year for three years. At the end of three years, the press would have no salvage value. The company's cost of capital is 10%. The company uses straight-line depreciation with no mid-year convention. What is the accounting rate of return on the original investment in the press to the nearest percent, assuming no taxes are paid?


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