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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

Respuesta :

meerkat18
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).

Answer:

The accounting rate of return is 2.37%

Explanation:

The accounting rate of return can be calculated by dividing the net income with the initial investment.

Thus given initial investment is $76000 and net income is $1805.

So, the accounting rate of return = (Net income / Initial investment) × 100

The accounting rate of return = (1805 / 76000) × 100

The accounting rate of return = 2.37%

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