The Stowe Sock Company is considering purchasing new business software. If the initial cost of the software is $26,000 with a salvage value of $0.00, the software has a before-tax average annual net cash flow of $8,000 and an annual depreciation of $5,000, what is the average rate of return on the software? Assume a 30% tax rate and that Stowe uses the average rate of return method to evaluate capital asset decisions. a.) 6.19% b.) 16.15% c.) 18.27% d.) 22.18%

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To calculate the average rate of return we need to consider the initial investment cash flows deprec... View the full answer