Solutions Tool Co. is considering investing in specialized equipment costing $975,000. The equipment has a useful life of five years and a residual value of $75,000. Depreciation is calculated using the straight-line method. The expected net cash inflows from the investment are given below:
$\begin{array}{rr}
\text { Year 1 } & \$ 275,000 \
\text { Year 2 } & 220,000 \
\text { Year 3 } & 200,000 \
\text { Year 4 } & 200,000 \
\text { Year 5 } & 180,000 \
& \$ 1,075,000
\end{array}$ Compute the accounting rate of return on the investment. Show your calculations and round to two decimal places.

Question

Solutions Tool Co. is considering investing in specialized equipment costing $975,000. The equipment has a useful life of five years and a residual value of $75,000. Depreciation is calculated using the straight-line method. The expected net cash inflows from the investment are given below:
 $\begin{array}{rr}
\text { Year 1 } & \$ 275,000 \
\text { Year 2 } & 220,000 \
\text { Year 3 } & 200,000 \
\text { Year 4 } & 200,000 \
\text { Year 5 } & 180,000 \
& \$ 1,075,000
\end{array}$ Compute the accounting rate of return on the investment. Show your calculations and round to two decimal places.

Quizplus · Accepted Answer

The Answer of Solutions Tool Co. is considering investing in specialized equipment costing $975,000. The equipment has a useful life of five years and a residual value of $75,000. Depreciation is calculated using the straight-line method. The expected net cash inflows from the investment are given below:
 $\begin{array}{rr}
\text { Year 1 } & \$ 275,000 \
\text { Year 2 } & 220,000 \
\text { Year 3 } & 200,000 \
\text { Year 4 } & 200,000 \
\text { Year 5 } & 180,000 \
& \$ 1,075,000
\end{array}$ Compute the accounting rate of return on the investment. Show your calculations and round to two decimal places.

Solutions Tool Co Compute the Accounting Rate of Return on the Investment