Suppose Barnes & Noble Booksellers is considering investing in warehouse-management software that costs $500,000,has $50,000 residual value and should lead to cash cost savings of $120,000 per year for its five-year life.In calculating the ARR,which of the following figures should be used as the equation's denominator?

Question

Quizplus · Accepted Answer

The denominator in the ARR equation should be the initial investment, which in this case is $500,000. The residual value is not included in the calculation, as it is a separate consideration for the end of the asset's life.

Suppose Barnes & Noble Booksellers Is Considering Investing in Warehouse-Management