Question

A company is planning to purchase a machine that will cost $ 28,800 with a six - year life and no salvage value . The company uses straight deprecation The company expects to sell the machine's output of 3.000 units evenly throughout each year A projected income statement for each year of the asset's life appears below . What is the accounting rate of return for this machine

Answer 1

the accounting rate of return is 89.44%

Step-by-step explanation:

The computation of the accounting rate of return is shown below:

accounting rate of return is

= net income ÷ average investment

= $12,880 ÷ ($28,800 ÷ 2)

= 89.44%

Hence, the accounting rate of return is 89.44%

The same is to be considered and relevant