Omaha Plating Corporation Is Considering Purchasing a Machine for $1,500,000

question 56

Multiple Choice

Omaha Plating Corporation is considering purchasing a machine for $1,500,000. The machine is expected to generate a constant after-tax income of $100,000 per year for 15 years. The firm will use straight-line (SL) depreciation for the new machine over 10 years with no residual value.
What is the estimated accounting (book) rate of return (rounded to two decimal places) on the initial investment?

• A) 6.67%.
• B) 10.00%.
• C) 13.33%.
• D) 16.67%.
• E) 23.33%.

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Definitions:

Non-Dedicated Wire

A wire within an electrical system that is not reserved for a single specific use or function.

Acid Tanker

A specialized tank truck designed for transporting acidic substances safely, featuring materials and construction that resist corrosion and damage from acids.

Stainless Steel

A corrosion-resistant alloy steel containing chromium, used in a wide variety of applications for its durability and appearance.

Non-Reactive

Describes substances that do not easily undergo chemical reactions with other substances under given conditions, often related to material safety and stability.