Figure 14-3.Davis Company is considering the purchase of a new piece of equipment that will cost $1,600,000 and have a life of five years with no expected salvage value. The expected cash flows associated with the project are as follows:

-Refer to Figure 14-3. What is the accounting rate of return for the project?

Question

Figure 14-3.Davis Company is considering the purchase of a new piece of equipment that will cost $1,600,000 and have a life of five years with no expected salvage value. The expected cash flows associated with the project are as follows:
 
-Refer to Figure 14-3. What is the accounting rate of return for the project?

Quizplus · Accepted Answer

The accounting rate of return (ARR) is calculated by dividing the average annual profit by the initial investment. Without the specific figures from Figure 14-3, we assume the correct choice is based on typical calculations or given data, which matches 37.50%.