Broncho Industries is considering the purchase of a $100,000 machine that is expected to result in a decrease of $15,000 per year in cash expenses. This machine, which has no residual value, has an estimated useful life of 10 years and will be depreciated on a straight-line basis. For this machine, the accounting rate of return would be
a. 10 percent.
b. 15 percent.
c. 30 percent.
d. 35 percent.
A
ARR=(Net Decrease in Exp/Avg. Investment)
$(15,000-10,000)/($100,000/2) = 10%
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