A company is planning to purchase a machine that will cost $24,000, have a six-year life, and be depreciated over a three-year period with no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below.
Sales ............ ..... $90000
Costs:
Manufacturing .......... $52000
Depreciation on Machine. $4000
Selling and Admin Expens.$30000 (86000)
Income before taxes $4000
Income tax (%50) (2000)
Net income ....................$2000
What is the accounting rate of return for this machine?