Belmont Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net income after tax of $200,000. The equipment will have an initial cost of $1,000,000 and have an 8-year life. If there is no salvage value of the equipment, what is the accounting rate of return?
A. 15%
B. 40%
C. 20%
D. 12.5%
Answer: C
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