Delta Mu Delta is considering purchasing some new equipment costing $400,000. The equipment will be depreciated...
Delta Mu Delta is considering purchasing some new equipment costing $400,000. The equipment will be depreciated on a straight-line basis to a zero book value over the four-year life of the project. Projected net income for the four years is $18,900, $21,300, $26,700, and $25,000. What is the average accounting rate of return?
It is one of the following:
11.49 percent
11.63 percent
12.01 percent
12.49 percent
13.20 percent
Homework Answers
Hi,
Please find the detailed answer as follows;
Average Accounting Rate of Return = Average Net Income/Average Investment = (18900 + 21300 + 26700 + 25000)/4/400000/2 = 11.49%
Option A (11.49%) is the correct answer.
Thanks.
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