The manager at the Key Factory purchased a new key-fitting machine at the plant in Delaware.The net investment is $450,000 and the expected average annual after-tax operating cash inflows of $122,000.The new machine results in depreciation deductions of $80,000 per year ($100,000 in annual depreciation for the new machine relative to $20,000 per year on the existing machine).The increase in expected annual after-tax income?
Required
Compute the AARR.

Question

Quizplus · Accepted Answer

A)AARR = [($122,000 - $80,000)/ $450,000] = .09,or 9%

The Manager at the Key Factory Purchased a New Key-Fitting