The following relates to a proposed equipment purchase: Assuming that net cash flows are received evenly throughout the year, the accounting rate of return is (ignore income taxes):

Question

The following relates to a proposed equipment purchase:  Assuming that net cash flows are received evenly throughout the year, the accounting rate of return is (ignore income taxes):

Quizplus · Accepted Answer

Annual depreciation expense = ($144,000 − $4,000)/4 = $35,000/yr.; After-tax income = $46,100 − $35,000 = $11,100; Accounting rate of return = $11,100/[($144,000 + $4,000)/2] = 15%

The Following Relates to a Proposed Equipment Purchase: Assuming