our 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 $ 55,000 $ 55,000 $ 55,000 $ 55,000 $ 55,000 Less: Accumulated depreciation 0 13,750 27,500 41,250 55,000 Net investment $ 55,000 $ 41,250 $ 27,500 $ 13,750 $ 0 The machine generates, on average, $5,300 per year in additional net income. What is the average accounting return for this machine? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) AAR %
our 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 $ 55,000 $ 55,000 $ 55,000 $ 55,000 $ 55,000 Less: Accumulated depreciation 0 13,750 27,500 41,250 55,000 Net investment $ 55,000 $ 41,250 $ 27,500 $ 13,750 $ 0 The machine generates, on average, $5,300 per year in additional net income. What is the average accounting return for this machine? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) AAR %
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
our 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 | $ | 55,000 | $ | 55,000 | $ | 55,000 | $ | 55,000 | $ | 55,000 | |||||||||
| Less: Accumulated depreciation | 0 | 13,750 | 27,500 | 41,250 | 55,000 | ||||||||||||||
| Net investment | $ | 55,000 | $ | 41,250 | $ | 27,500 | $ | 13,750 | $ | 0 | |||||||||
The machine generates, on average, $5,300 per year in additional net income.
What is the average accounting return for this machine? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
AAR %
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education