A Company Is Considering the Purchase of a New Machine

question 13

Multiple Choice

A company is considering the purchase of a new machine for $48,000.Management predicts that the machine can produce sales of $16,000 each year for the next 10 years.Expenses are expected to include direct materials,direct labor,and factory overhead totaling $8,000 per year plus straight-line depreciation of $4,000 per year.The company's after-tax net income,based on a tax rate of 40%,is $2,400.What is the approximate accounting rate of return for the machine?

• A)13%.
• B)17%.
• C)8%.
• D)27%.
• E)10%.

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