Question

Check my work Required information Use the following information for the Quick Study below. The following information applies to the questions displayed below.) Part 2 of 2 Project A requires a $375,000 initial investment for new machinery with a five-year life and a salvage value of $42,000. The company uses straight-line depreciation. Project A is expected to yield annual net income of $27.700 per year for the next five years. 1.25 points QS 24-6 Accounting rate of return LO P2 eBook Hint Compute Project A's accounting rate of return. Print Accounting Rate of Return Choose Denominator: Choose Numerator: Accounting Rate of Return Accounting rate of return References

Answer 1

depreciation = ( cost of asset - salvage value) / useful life of asset

= (375000-42000)/5

= 333000 / 5

= 66600

accounting rate of return =

they are 3 methods to calculate ARR

Average Investment Basis ARR< Avg. Anbat poolt AVI. Investment ALB. Iniestment : 375000+42000 2 - 208500 ANG_AnnLas Profit z 27700- 66600 I - 38900 ARR= -28900 208500 X 100 : 18.65 % IS given After Depreciation Annual Prorit Then ARRE 21700 x 100 208500 = 13.28 /

1) Annual basis

2) Total investment basis

3) average investment basis

Previously I have done based on total Total investment basis

Now average investment basis

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