5. The Fine Clothing Factory wants to replace an old machine with a new one. The...

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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 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- 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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old Machine can be sold 10000 New machine Increase Revenul 160000 Amual Ope... View the full answer