The Harris Corporation bought a new machine that cost $170,000 with a 15-year life and a residual value of $20,000. They plan to generate annual cash inflows of $40,000 over 15 years. Calculate the accounting rate of return.

Question

Quizplus · Accepted Answer

($170,000 - $20,000)/15 years = $10,000 annual depreciation expense
$40,000 - $10,000/$170,000 = $30,000/$170,000 = 17.65%

The Harris Corporation Bought a New Machine That Cost $170,000