A Company Is Considering Purchasing a Machine for $21,000

question 93

Multiple Choice

A company is considering purchasing a machine for $21,000.The machine will generate an after-tax net income of $2,000 per year.Annual depreciation expense would be $1,500.The machine has no salvage value.What is the accounting rate of return?

• A)19%
• B)33%
• C)17%
• D)10%
• E)25%

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Definitions:

Winding Up Process

The procedure of settling the accounts and liquidating the assets of a company for the purpose of distributing the net assets to shareholders and dissolving the business.

Dissolution

The process of formally ending or dissolving an entity such as a business or partnership.

Competing Business

A company or enterprise that operates in the same industry or market as another and vies for the same set of customers.

Uniform Partnership Act

A standard set of laws adopted by states to regulate business partnerships, aiming at consistency across jurisdictions.