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Determine the accounting rate of return

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Reference no: EM131969022

Question - Equipment is purchased at a cost of $39,000. As a result, annual cash revenues will increase by $20,000; annual cash operating expenses will increase by $7,000; straight-line depreciation is used; the asset has a ten-year life; the salvage value is $3,000. Assuming a tax bracket of 34%, determine the accounting rate of return?

A. 13%

B. 16%

C. 27%

D. 33%

Reference no: EM131969022

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