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What is the average accounting return for the machine

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Reference no: EM132812786

Your firm is considering purchasing a machine with the following annual, end-of-year, book investment accounts.

Purchase Date                                  Year 1                Year 2              Year 3                Year 4

Gross investment                          $72,000          $72,000          $72,000               $72,000                  $72,000

Less:

Accumulated depreciation                    0               18,000                  36,000               54,000                  72,000

Net investment                               $72,000             $54,000              $36,000                $18,000          $0

The machine generates, on average, $7,500 per year in additional net income.

Problem 1: What is the average accounting return for this machine?

Reference no: EM132812786

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