A company buys a machine for $76,000 that has an expected life of 6 years and no salvage value. the company anticipates a yearly after tax net income of $1,805. what is the accounting rate of return

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Business

Leah Vang

19 August, 03:57

A company buys a machine for $76,000 that has an expected life of 6 years and no salvage value. the company anticipates a yearly after tax net income of $1,805. what is the accounting rate of return

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Matteo Parks · Answer 1

To compute the accounting rate of return, you just have to divide the average accounting profit with the average cost of investment. In this problem, the average accounting profit is $1,805 and the average cost of investment is $76,000. Using the formula in computing the accounting rate of return, we can get 2.38% ($1,805 / $76,000).