Bowen is considering the purchase of equipment costing $150,000.The equipment has a 12- year useful life and will generate $25,000 in annual cash flows.The company has a 10% required rate of return and uses the straight-line depreciation method.The accounting rate of return on this equipment is closest to

Question

Quizplus · Accepted Answer

$25,000 - $150,000 ÷ 12 = $12,500
$12,500 ÷ $150,000 = 8.3%

Bowen Is Considering the Purchase of Equipment Costing $150,000