Question: Sample Two, Inc., is considering whether to purchase a delivery truck that will cost $26,000, last six years, and have an estimated residual value of

Sample Two, Inc., is considering whether to purchase a delivery truck that will cost $26,000, last six years, and have an estimated residual value of $6,000. Average annual net income from the delivery truck is estimated at $4,000. The company's owners want to earn an accounting rate of return of 20 percent.

Compute the average investment cost and the accounting rate of return. Should the company make the investment?

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