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2 August, 21:36

A company buys a machine for $79,000 that has an expected life of 4 years and no salvage value. The company uses straight-line depreciation. The company anticipates a yearly net income of $3800 after taxes of 16%, with the cash flows to be received evenly throughout each year. What is the accounting rate of return

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  1. 2 August, 21:53
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    4.81%

    Explanation:

    Accounting rate of return is the ratio of annual profit and initial investment made on an asset or project. It is expressed in the times value.

    Formula for Accounting rate of return is as follow

    Accounting Rate of return = Annual Profit / Initial Investment

    Initial Investment = $79,000

    Annual Profit = $3,800

    placing values in the formula

    Accounting rat of return = $3,800 / $79,000

    Accounting rat of return = 0.0481

    Accounting rat of return = 4.81%
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