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Lakeside Inc. is considering replacing old production equipment with state-of-the-art technology that will allow production...

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Accounting

Lakeside Inc. is considering replacing old production equipment with state-of-the-art technology that will allow production cost savings of $10,000 per month. The new equipment will have a five-year life and cost $420,000, with an estimated salvage value of $33,000. Lakesides cost of capital is 7%. Lakeside Inc. uses a straight-line depreciation method.

Required: Calculate the accounting rate of return for the new production equipment.

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