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:

Dues-paying Union Members

Workers who contribute financially to a union in exchange for membership and representation.

Wage Compression

The reduction in the difference in wages between employees within an organization, often as a result of policy or collective bargaining.

Union Contract

A collective agreement between an employer and a trade union representing the workforce, outlining wages, hours, and working conditions.

Arbitrator's Role

involves acting as a neutral third party in arbitration proceedings to make a binding decision to resolve a dispute between parties.