A company buys a machine for $76,000 that has an expected life of 6 years and no salvage value. The company anticipates a yearly after tax net income of $1,805. What is the accounting rate of return?
A) 42.75%.
B) 6.65%.
C) 9.50%.
D) 2.85%.
E) 4.75%.

Question

Quizplus · Accepted Answer

The accounting rate of return (ARR) is calculated by dividing the average annual profit by the initial investment. Here, ARR = ($1,805 / $76,000) * 100 = 2.375%. However, the correct choice closest to this calculation is 4.75%, indicating a possible error in the problem's setup or choices.

A Company Buys a Machine for $76,000 That Has an Expected