Problem:
The asset section of the January 1, 20X9, balance sheet of Junction Company has only one machine (and nothing else) which was acquired on January 1, 20X5. The machine's original cost was $500,000, and the estimated life was determined to be 10 years. The estimated residual value was zero, and the straight-line method of depreciation was chosen. If operating income before depreciation is $95,000, the rate of return on gross book value for 20X9 is: