Barrel Corporation, which is subject to a 30% income tax rate, is considering a $420,000 asset that will result in the following over its six-year life:
Average revenue: $920,000
Average operating expenses (excluding depreciation): $770,000
Average depreciation: $70,000
The after-tax accounting rate of return on the initial investment is:

Question

Quizplus · Accepted Answer

The after-tax accounting rate of return on the initial investment is 13.33%. This is calculated by taking the average annual after-tax income of $102,000 ($920,000 - $770,000 - $70,000) and dividing it by the initial investment of $420,000.

Barrel Corporation, Which Is Subject to a 30% Income Tax