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Watson Corporation is considering buying a machine for $45,000. Its estimated useful life is 5...

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Accounting

Watson Corporation is considering buying a machine for $45,000. Its estimated useful life is 5 years, with no salvage value. Watson anticipates annual net income after taxes of $1,800 from the new machine. What is the accounting rate of return assuming that Watson uses straight-line depreciation and that income is earned uniformly throughout each year?

Multiple Choice

  • 4.0%.

  • 5.3%.

  • 5.0%.

  • 6.7%.

  • 8.0%.

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