Question: 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

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 68000 $68,000 $68,000 $68,000 $68,000

Less: Accum deprec 0 17000 34,000 51,000 68000

Net investment $68,000 $51,000 $34,000 17,000 0

The machine generates, on average, $5,500 per year in additional net income.

What is the average accounting return for this machine?

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