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:

Portable Benefits

Benefits that can be retained by employees even when they change employers, promoting flexibility and job mobility.

Profit-sharing Programs

Compensation strategies where employees receive a share of the company's profits, providing an incentive for performance and productivity.

Risks

Potential events or circumstances that could lead to negative outcomes, affecting objectives negatively.

Off-the-job Paid Leaves

Time off from work that employees are granted for various reasons, such as vacation, illness, or personal matters, with compensation.