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Calculate the accounting rate of return of the system

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Reference no: EM133172563

Question - Kevin's House of Music wants to purchase Transposelt, a system that transposes any song in its database and prints sheet music in the requested key. This system allows singers to obtain sheet music in keys that are suitable to their vocal range. The software for the system costs $11,600; a new computer and a laser printer costing $3,700 will be needed to run the system. Kevin estimates that the system will generate additional annual sales revenue of $23,600 and that annual cash expenditures will be $17,837. Kevin uses straight-line depreciation. The software, computer, and printer will have a useful life of 5 years. The system will have a $255 salvage value at the end of its 5-year useful life.

Required -

(a) Calculate the annual net operating income generated by the system.

(b) Calculate the accounting rate of return of the system.

Reference no: EM133172563

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