A Company Buys a Machine for $60,000 That Has an Expected

question 60

Multiple Choice

A company buys a machine for $60,000 that has an expected life of 9 years and no salvage value. The company anticipates a yearly net income of $2,850 after taxes of 30%, with the cash flows to be received evenly throughout each year. What is the accounting rate of return?

• A) 2.85%.
• B) 4.75%.
• C) 6.65%.
• D) 9.50%.
• E) 42.75%.

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Definitions:

Monopolistically Competitive

Describes a market structure where many companies sell products that are similar but not identical, allowing for competition based on price, quality, and marketing.

Profit-maximizing Price

The price level at which a company can make the maximum possible profit on its products or services, based on the dynamics of supply and demand.

Demand

The desire, willingness, and ability of consumers to purchase goods and services at a given price.

Cost Data

Information related to the expenses incurred in the production, operation, or acquisition of goods and services.