Question

signment/a ssignmentMain.doFinvoker assignments&takeAssignmentSessionLocator assignment-takeinprogressefalse Calculator Payback, Accounting Rate of Return, Net Present Value, Internal Rate of Return Melnik Company wants to buy a new machine costing $800,000. The equipment will last five years with no expected salvage value. The expected after-tax cash flows associated with the project follow: Year Cash Revenues Cash Expenses 1 $1,400,000 $1,116,000 1,400,000 1,116,000 1.480,000 1,116,000 1,400,000 1,116,000 1,400,000 1,116,000 Required: Compute the equipment's accounting rate of return. Enter as a percent and round your answer to one decimal place Accounting rate of return Previous Next MacBook Air PAGAARABU EROUUOOPUU D

Answer 1

Solution Accounting late of return = 15.5% hlorking notes 1) Accounting late of return 1. =- Average Net Profit loo Average Investment $ 124000 X 100 $800000 = 15.5.1. 2.) Average Net Profit Cash Revenues Year Cash Expense Net Profit Depreciation 1. $1,400,000 $1,116,000) ($160000) $124000 $1,400,000 (61,116,000) ($160000) $1240 000 $1,400,000 ($ 1,116,000) C$ 160000 $124000 4. $1,400,000 ($1,116,000) ($160000) $124000 5. $1,400,000 ($1,116,000) C$ 160000) Total Net income $ 680000 Average Net profit = Net Income - Non of years HN ms $124COO - 620000 = $194000