Buster Evans is considering investing $20,000 in a project with the following annual cash revenues and expenses:

Depreciation will be $4,000 per year.
What is the accounting rate of return on the investment?

Question

Buster Evans is considering investing $20,000 in a project with the following annual cash revenues and expenses:

Depreciation will be $4,000 per year.
What is the accounting rate of return on the investment?

Quizplus · Accepted Answer

11ea8a4c_4957_0a6c_a0e6_c996196a7259_TB5550_00 Average annual income = $10,000 / 5 = $2,000
ARR = $2,000 / $20,000 = 0.10 or 10%

Buster Evans Is Considering Investing $20,000 in a Project with the Following