For the following questions, circle the best response.
Use the following data for Question.
Antonio, Inc., has invested in new production equipment at a cost of $24,000. The equipment has an estimated useful life of eight years. The estimated annual sales and operating expense related to the equipment are as follows:
Annual sales | $44,000 |
Labor costs | (36,000) |
Depreciation of equipment | (3,000) |
Operating income | $ 5,000 |
Income taxes (40%) | (2,000) |
Net income | $ 3,000 |
The accounting rate of return is approximately
a. 12.5%.
b. 20.8%.
c. 25.0%.
d. 33.3%.
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