Hammer Corporation wants to purchase a new machine for $303,000. Management predicts that the machine will produce sales of $216,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. The firm uses straight-line depreciation with an assumed residual (salvage) value of $50,000. Hammer's combined income tax rate, t, is 50%.

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Hammer Corporation wants to purchase a new machine for $303,000. Management predicts that the machine will produce sales of $216,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. The firm uses straight-line depreciation with an assumed residual (salvage) value of $50,000. Hammer's combined income tax rate, t, is 50%.

 

What is the estimated accounting (book) rate of return (ARR) for the proposed investment, based on average investment? (Round answer to nearest whole number/percentage.)

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