Alpha Inc. is evaluating the purchase of a machine costing $350,000. The expected useful life of...
Alpha Inc. is evaluating the purchase of a machine costing $350,000. The expected useful life of the machine is 5 years at the end which it would have no residual value, and the depreciation is assumed to be on straight-line basis. The estimated total income from the machine is $500,000. The expected average rate of return for this machine is:
Homework Answers
Average net income = 500000/5 = 100000
Average investment = 350000/2 = 175000
Average rate of return = Average net income/Average investment
= 100000/175000
Average rate of return = 57.14%
Note : Sometime it can be = 100000/350000 = 28.57% but it could prefer very less
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Alpha Inc. is evaluating the purchase of a machine costing
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Carmel Corporation is considering the purchase of a machine costing $56,000 with a 9-year useful life and no salvage value. Carmel uses straight-line depreciation and assumes that the annual cash inflow from the machine will be received uniformly throughout each year. In calculating the accounting rate of return, what is Carmel's average investment? Multiple Choice $28,000. $6,914. $56,000. $6,222 $31,111.
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