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Alona [7]
3 years ago
8

Superstition Industries has a $2,000,000 asset investment and is subject to a 30% income tax rate. Cash inflows from the project

are expected to average $400,000 before tax over the next few years; in contrast, average income before tax is anticipated to be $350,000. The company's after-tax accounting rate of return on this investment is:
Business
1 answer:
nekit [7.7K]3 years ago
6 0

Answer:

12.25%

Explanation:

Calculation to determine what The company's after-tax accounting rate of return on this investment is:

Using this formula

After-tax accounting rate of return =Avarage income/Average investment

Let plug in the formula

After-tax accounting rate of return=($350,000*70%)/$2,000,000

(100%-30%=70%)

After-tax accounting rate of return=$245,000/$2,000,000

After-tax accounting rate of return=0.1225*100

After-tax accounting rate of return=12.25%

Therefore The company's after-tax accounting rate of return on this investment is:12.25%

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Starbucks wants to use the subjective approach to evaluate a new project. They are considering expanding their stores and rentin
ollegr [7]

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The given  table can be well presented as follows:

Category                 Examples                                Adjustment Factor

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Moderate risk    Cost savings, Expansion                 0

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Low risk                 Replacement of existing             -4%

                                equipment

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