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<p style="text-align:justify;">Jonson Manufacturing is considering buying an automated machine that costs Rs250,000 and requires working capital of Rs25,000. Annual cash savings are anticipated to be Rs103,000 for five years. The company uses straight-line depreciation. The salvage value at the end of five years is expected to be Rs10,000. The working capital will be recovered at the end of the machine's life.</p> <p> </p> <p style="text-align:justify;">Compute the accounting rate of return based on the initial investment. Keeping in view the accounting rate of return, should the company invest in this project?</p>
for finding depreciation we need to have rate of depreciation. and we do not have the date of purchase or the date of being last used to determine the depreciation date. the cost is added with the working capital and the salvage value is deducted from it to get the balance to start the straight line method.
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