A company buys a machine for $76,000 that has an expected life of 6 years and no salvage value. the company anticipates a yearly after tax net income of $1,805. what is the accounting rate of return

Question

Business

Gauge Roy

29 March, 17:11

A company buys a machine for $76,000 that has an expected life of 6 years and no salvage value. the company anticipates a yearly after tax net income of $1,805. what is the accounting rate of return

+2

Answers (1)

Know the Answer?

Randy Benitez · Answer 1

To compute the accounting rate of return, you just have to divide the average accounting profit with the average cost of investment. In this problem, the average accounting profit is $1,805 and the average cost of investment is $76,000. Using the formula in computing the accounting rate of return, we can get 2.38% ($1,805 / $76,000).