A machine costs $180,000 and will have an eight-year life, a $20,000 salvage value, and straight-line depreciation is used. Management estimates the machine will yield an after-tax net income of $12,500 each year. Compute the accounting rate of return for the investment.
A. 11.8%.
B. 12.5%.
C. 26.8%.
D. 10.8%.
E. 22.5%.
Answer: B
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