You are considering an equipment purchase costing $187,000.This equipment will be depreciated straight-line to zero over its three-year life.What is the average accounting return if this equipment produces the following net income?
A)12.29 percent
B)14.38 percent
C)15.67 percent
D)16.51 percent
E)21.00 percent

Question

You are considering an equipment purchase costing $187,000.This equipment will be depreciated straight-line to zero over its three-year life.What is the average accounting return if this equipment produces the following net income? 
A)12.29 percent 
B)14.38 percent 
C)15.67 percent 
D)16.51 percent 
E)21.00 percent

Quizplus · Accepted Answer

AAR = [($16,300 + $17,800 + $12,200)/3]/[($187,000 + $0)/2] = 16.51 percent

You Are Considering an Equipment Purchase Costing $187,000