A machine costing RM900,000, which can be used for five years with no salvage value left, can generate yearly income before interest and tax of RM280,000.

Required:

a) Compute the annual rate of return for five years by using the beginning of year book value as the base (Corporate income tax rate is 50%).

 i) Straight line method 

ii) Sum of the years' digits method.

b) Comment your answers

Answer rating: 100% (QA)

a To compute the annual rate of return using different depreciation methods we need to calculate the net income after tax and divide it by the book va... View the full answer