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CAPITAL BUDGETING: QUESTION Determine the average rate of return from the following data of the machine A & B: Machine A ($)Machine B ($) Cost56,12556,125 Annual estimated income after Depreciation and Income tax: First Year3,37511,375 Second Year5,3759,375 Document Preview:

CAPITAL BUDGETING: QUESTION Determine the average rate of return from the following data of the machine A & B: Machine A ($) Machine B ($) Cost 56,125 56,125 Annual estimated income after Depreciation and Income tax: First Year 3,375 11,375 Second Year 5,375 9,375 Third Year 7,375 7,375 Fourth Year 9,375 5,375 Fifth Year 11,375 3,375 Total 36,875 36,875 Estimated life in years 5 5 Estimated salvage value 3,000 3,000 Average income tax rate 55% 55% Depreciation has been charged on straight line basis

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