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Pique Corporation wants to purchase a new machine for $300,000. Management predicts that the machine can produce sales of $200,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Pique's tax rate is 40%. Management requires a minimum 10% rate of return on all investments. What is the annual book (accounting) rate of return based on the initial investment?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M943927

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