Monterey Corporation Is Considering the Purchase of a Machine Costing

question 55

Multiple Choice

Monterey Corporation is considering the purchase of a machine costing $36,000 with a 6-year useful life and no salvage value. Monterey uses straight-line depreciation and assumes that the annual cash inflow from the machine will be received uniformly throughout each year. In calculating the accounting rate of return, what is Monterey's average investment?

• A) $6,000.
• B) $7,000.
• C) $18,000.
• D) $21,000.
• E) $36,000.

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