Hollister Company is considering the purchase of a new machi…
Hollister Company is considering the purchase of a new machine for $60,000. The machine would generate an annual cash flow before depreciation and taxes of $25,647 for four years. At the end of four years, the machine would have no salvage value. The company’s cost of capital is 12%. The company uses straight-line depreciation with no mid-year convention and has a 40% tax rate. What is the accounting rate of return (rounded to two decimal places) on the original investment in the machine?
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