Final answer:
The estimated accounting (book) rate of return on the initial investment is 100%.
Step-by-step explanation:
To calculate the estimated accounting (book) rate of return on the initial investment, we need to divide the annual depreciation expense by the initial investment cost. In this case, since the machine is being depreciated using straight-line (SL) depreciation over 6 years with no residual value, the annual depreciation expense would be the initial investment cost divided by the useful life of the machine, which is 6 years. The estimated accounting rate of return is calculated as:
Estimated Accounting Rate of Return = (Annual Depreciation Expense / Initial Investment Cost) x 100%
Since there is no residual value, the entire initial investment cost would be allocated to depreciation over the 6-year period. Therefore, the estimated accounting rate of return would be:
Estimated Accounting Rate of Return = ($102 million / $102 million) x 100% = 100%
Therefore, the estimated accounting (book) rate of return on the initial investment is 100%.