Ivanhoe Corp. management is expecting a project to generate after-tax income of $76,940 in each of...
Ivanhoe Corp. management is expecting a project to generate
after-tax income of $76,940 in each of the next three years. The
average book value of the project’s equipment over that period will
be $181,560. If the firm’s investment decision on any project is
based on an ARR of 37.5 percent. (Round answer to 1
decimal place, e.g. 5.2%.)
What is the project’s accounting rate of return?
| Accounting rate of return is | ___________% |
Should the firm accept this project?
| The firm should (reject,accept) the project. |
Homework Answers
Accounting rate of return:
= $76,940/$181,560
= 42.38%
Hence, accounting rate of return is 42.4%
Firm should accept project.
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