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

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).