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Question
Assume that the cost of certain equipment a business is considering purchasing is $100,000. The equipment will be depreciated over five years, at which point the salvage value is expected to be $8,000. Anticipated after-tax profits (losses) are as follows:
Year After-Tax Profits/Losses
1 ($10,000)
2 20,000
3 25,000
4 35,000
5 20,000
Compute the accounting return on investment technique showing the formulas and computations.
Answer
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