A Company Bought a Machine That Has an Expected Life

question 112

Multiple Choice

A company bought a machine that has an expected life of 6 years and no salvage value. Management estimates that this machine will generate annual after-tax net income of $700. If the accounting rate of return is 10%, what was the purchase price of the machine?

• A) $7,000
• B) $700
• C) $28,000
• D) $14,000
• E) $3,500

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