Gunslinger Company is considering the purchase of pipe cutting equipment. Data on the equipment are as follows: $$\begin{array} { l r }
\text { Original investment } & \$ 35,000 \
\text { Net annual cash inflow } & \$ 8,000 \
\text { Expected economic life in years } & 5 \
\text { Salvage value at the end of five years } & \$ 3,500
\end{array}$$ The company uses the straight-line method of depreciation with no mid-year convention. What is the accounting rate of return on original investment rounded to the nearest percent, assuming no taxes are paid?

Question

Gunslinger Company is considering the purchase of pipe cutting equipment. Data on the equipment are as follows: $$\begin{array} { l r } 
\text { Original investment } & \$ 35,000 \
\text { Net annual cash inflow } & \$ 8,000 \
\text { Expected economic life in years } & 5 \
\text { Salvage value at the end of five years } & \$ 3,500
\end{array}$$ The company uses the straight-line method of depreciation with no mid-year convention. What is the accounting rate of return on original investment rounded to the nearest percent, assuming no taxes are paid?

Quizplus · Accepted Answer

The Answer of Gunslinger Company is considering the purchase of pipe cutting equipment. Data on the equipment are as follows: $$\begin{array} { l r } 
\text { Original investment } & \$ 35,000 \
\text { Net annual cash inflow } & \$ 8,000 \
\text { Expected economic life in years } & 5 \
\text { Salvage value at the end of five years } & \$ 3,500
\end{array}$$ The company uses the straight-line method of depreciation with no mid-year convention. What is the accounting rate of return on original investment rounded to the nearest percent, assuming no taxes are paid?

Gunslinger Company Is Considering the Purchase of Pipe Cutting Equipment