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5. The Fine Clothing Factory wants to replace an old machine with a new one. The old machine can be sold to a small
5. The Fine Clothing Factory wants to replace an old machine with a new one. The old machine can be sold to a small factory for $10,000. The new machine would increase annual revenue by $160,000 and annual operating expenses by $50,000. The new machine would cost $350,000. The estimated useful life of the machine is 10 years with zero salvage value. (a) Compute accounting rate of return (ARR) of the machine using above information. (13%) (b) Should Fine Clothing Factory purchase the machine if management wants an accounting rate of return of 15% on all capital investments? (2%) -End of Paper-
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Management and Cost Accounting
Authors: Colin Drury
8th edition
978-1408041802, 1408041804, 978-1408048566, 1408048566, 978-1408093887
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