Your firm is considering purchasing a machine with the following annual, end-of-

Question

Your firm is considering purchasing a machine with the following annual, end-of-year, book investment accounts. Purchase Date $57,000 Year 4 $57,000 $57,800 $57,800 $57,080 57,000 Year Year 1 14,250 $42,75 0 ear 3 Gross investment Less: Accumulated depreciation Net investment 42.7505718 28r300 $57,000 $28,508 $14,258 The machine generates, on average, $5,600 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. 3216.) AAR 0%

Explanation / Answer

Average Investment Value = (57000 + 57000 + 57000 + 57000) / 4 = $ 57000

Average Net Income = $ 5600

Average Accounting Return = (5600/57000) x 100 = 9.82 % approximately.

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