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A company is planning to purchase a machine that will cost

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A company is planning to purchase a machine that will cost $33,600, have a six-year life, and be depreciated over a three-year period with no salvage value. 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?

  Sales
$138,000   
  Costs:

  Manufacturing $53,600   
  Depreciation on machine 5,600   
  Selling and administrative expenses 46,000    (105,200)



  Income before taxes
$32,800   
  Income tax (35%)
(11,480)



  Net income
$21,320   



Reference no: EM13575018

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