Question: Average Accounting Return. Your firm is considering purchasing a machine with the following annual, end-of-year, book investment accounts. Purchase Date Year 1 Year 2 Year

Average Accounting Return. Your firm is considering purchasing a machine with the following annual, end-of-year, book investment accounts. Purchase Date Year 1 Year 2 Year 3 Year 4 Gross Investment $28,000.00 $28,000.00 $28,000.00 $28,000.00 $28,000.00 Less: Accumulated Depreciation $0.00 $7,000.00 $14,000.00 $21,000.00 $28,000.00 Net Investment $28,000.00 $21,000.00 $14,000.00 $7,000.00 $0.00 The machine generates, on average, $4300 per uear in additional net income. a. What is the average accounting return for this machine? b. What three flaws are inherent in this decision rule?

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