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What the accounting rate of return on initial investment is

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Reference no: EM133006917

Problem 1: Lace Company is planning to purchase a new machine for P600,000. The new machine will be depreciated on the straight line basis over six-year period with no salvage value, and a full year's depreciation will be taken in the year of acquisition. The new machine is expected to produce cash flow from operations, net of income taxes, P150,000 a year in each of the next six years. The accounting (book value) rate of return on the initial investment is expected to be:

A. 8.3%
B. 25.0%
C. 16.7%
D. 12.0%

Reference no: EM133006917

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