Question

Required information [The following information applies to the questions displayed below.] Peng Company is considering an investment expected to generate an average net income after taxes of $3,100 for three years. The investment costs $51,900 and has an estimated $10,800 salvage value. Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation. Accounting Rate of Return Choose Denominator: Choose Numerator: T = Accounting Rate of Return = Accounting rate of return 0

Answer 1

Ans.	Accounting rate of return = After tax net income / Average investment * 100
	$3,100 / $31,350 * 100
	9.89%
	*Average investment = (Initial investment + Salvage value) / 2
	($51,900 + $10,800) / 2
	$62,700 / 2
	$31,350