Holloway Company Is Considering the Purchase of a New Machine

question 6

Multiple Choice

Holloway Company is considering the purchase of a new machine for $40,000.The machine would generate an annual cash flow before depreciation and taxes of $15,647 for four years.At the end of four years, the machine would have no salvage value.The company's cost of capital is 12 percent.The company uses straight-line depreciation with no mid-year convention and has a 40 percent tax rate. What is the accounting rate of return on the original investment in the machine approximated to two decimal points?

• A) 14.12%
• B) 8.47%
• C) 39.12%
• D) 16.92%

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Definitions:

Micro

A prefix or term referring to small-scale or detailed aspects of a subject, often used in scientific and social sciences contexts.

Mezzo

This term refers to the mid-level practice in social work that focuses on small groups and community interventions.

Macro Levels

Pertains to large-scale social processes, institutions, and structures that transcend individual perspectives and experiences.

Macro-Level

Pertaining to the broadest context in social science analyses, focusing on societal structures, institutional frameworks, and population-level processes.