A company is planning to purchase a machine that will cost $24,000 with a six-year life and no salvage value. The company uses straight-line depreciation. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below. What is the accounting rate of return for this machine?

Question

Quizplus · Accepted Answer

Accounting rate of return = $2,000/[($24,000 + $0)/2] = 16.7%

A Company Is Planning to Purchase a Machine That Will