A company is planning to purchase a machine that will cost $24,000 with a six-year life and no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below. What is the accounting rate of return for this machine?
A) 33.3%.
B) 16.7%.
C) 50.0%.
D) 8.3%.
E) 4%.
B) 16.7%.
Explanation: Accounting rate of return = $2,000/[($24,000 + $0)/2] = 16.7%
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