Crane 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 $127,450 $176,875 $247,455 $254,440 $271,125 Expenses $141,410 $128,488 $137,289 $145,112 $139,556 Crane will accept all projects that provide an accounting rate of return (ARR) of at least 45 percent. (a1) Calculate accounting rate of return. (Round answer to 1 decimal place, e.g. 15.2%.) Accounting rate of return enter the Accounting rate of return in percentages rounded to 1 decimal place %
Crane 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 $127,450 $176,875 $247,455 $254,440 $271,125 Expenses $141,410 $128,488 $137,289 $145,112 $139,556 Crane will accept all projects that provide an accounting rate of return (ARR) of at least 45 percent. (a1) Calculate accounting rate of return. (Round answer to 1 decimal place, e.g. 15.2%.) Accounting rate of return enter the Accounting rate of return in percentages rounded to 1 decimal place %
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 3P
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Crane 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.
Crane will accept all projects that provide an accountingrate of return (ARR) of at least 45 percent.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
|
Sales
|
$127,450 | $176,875 | $247,455 | $254,440 | $271,125 | |||||
|
Expenses
|
$141,410 | $128,488 | $137,289 | $145,112 | $139,556 |
Crane will accept all projects that provide an accounting
(a1)
Calculate accounting rate of return. (Round answer to 1 decimal place, e.g. 15.2%.)
| Accounting rate of return | enter the Accounting rate of return in percentages rounded to 1 decimal place % |
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