NARRBEGIN: Exhibit 8-2 Exhibit 8-2

NARRBEGIN: Exhibit 8-2
Exhibit 8-2
A piece of equipment costs $1.2m.The equipment has a useful life of 4 years.In each of the four years,the investment generates a cash inflow of $0.5m.The impact of the investment project on net income is derived by subtracting depreciation from cash flow each year.
-Refer to Exhibit 8-2.The project's average accounting rate of return equals the average contribution to net income divided by the average book value of the investment. Assume the equipment is depreciated on a straight-line basis over 4 years,what is the average accounting rate of return?

A) 16.7%
B) 33.3%
C) 66.7%
D) Cannot tell from the given information