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:
$$\begin{array} { r r }
\text { Year 1 } & \$ 275,000 \
\text { Year 2 } & 220,000 \
\text { Year 3 } & 200,000 \
\text { Year 4 } & 200,000 \
\text { Year 5 } & \underline { 180,000 } \
& \$ 1,075,000
\end{array}$$ 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:
 $$\begin{array} { r r } 
\text { Year 1 } & \$ 275,000 \
\text { Year 2 } & 220,000 \
\text { Year 3 } & 200,000 \
\text { Year 4 } & 200,000 \
\text { Year 5 } & \underline { 180,000 } \
& \$ 1,075,000
\end{array}$$ 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:
 $$\begin{array} { r r } 
\text { Year 1 } & \$ 275,000 \
\text { Year 2 } & 220,000 \
\text { Year 3 } & 200,000 \
\text { Year 4 } & 200,000 \
\text { Year 5 } & \underline { 180,000 } \
& \$ 1,075,000
\end{array}$$ 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