Watson Corporation Is Considering Buying a Machine for $25,000

Multiple Choice

Watson Corporation is considering buying a machine for $25,000. Its estimated useful life is 5 years, with no salvage value. Watson anticipates annual net income after taxes of $1,500 from the new machine. What is the accounting rate of return assuming that Watson uses straight-line depreciation and that income is earned uniformly throughout each year?

A) 8.0%.
B) 12.0%.
C) 10.0%.
D) 6.0%.
E) 8.5%.