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Calculate accounting rate of return

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Question - Carla Vista Corp. management is considering purchasing a machine that will cost $117,250 and will be depreciated on a straight-line basis over a five-year period. The sales and expenses (excluding depreciation) for the next five years are shown in the following table. The company's tax rate is 34 percent.

 

Year 1

Year 2

Year 3

Year 4

Year 5

Sales

$118,450

$182,875

$241,455

$253,440

$270,125

Expenses

$136,410

$131,488

$145,289

$143,112

$138,556

Carla Vista will accept all projects that provide an accounting rate of return (ARR) of at least 45 percent. Calculate accounting rate of return.

Reference no: EM133024041

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