Ask Question
17 March, 21:30

A company is considering purchasing a machine for $21,000. The machine will generate an after-tax net income of $2,000 per year. Annual depreciation expense would be $1,500. The machine has no salvage value. What is the approximate accounting rate of return?

+1
Answers (1)
  1. 17 March, 21:40
    0
    rate of return 2.38%

    Explanation:

    accounting RoR = net annual profit / investment

    for this rate, any annual cost, depreciation included must be subtracted from the revenue.

    for fixed assets we should subtract the depreciation expense

    2,000 - 1,500 = 500 net annual profit

    500 / 21,000 = 0.023809523 = 2.3809523% = 2.38
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “A company is considering purchasing a machine for $21,000. The machine will generate an after-tax net income of $2,000 per year. Annual ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers