Accounting Rate of ReturnWeCare Clinic is planning on investing in some new echocardiogram equipment that will require an initial outlay of $155,000. The system has an expected life of five yearsand no expected salvage value. The investment is expected to produce the following net cash flows over its life: $74,000, $89,000, $91,000, $90,000, and $105,000.Required:1. Calculate the annual net income for each of the five years.Net IncomeYear 1$43,000Year 2$58,000Year 3$60,000$Year 4Year 559,00074,0002. Calculate the accounting rate of return. Enter your answer as a whole percentage value (for example, 16% should be entered as "16").38%3. What if a second competing revenue-producing investment has the same initial outlay and salvage value but the following cash flows (in chronological sequence):$105,000, $105,000, $105,000, $74,000, and $30,000? Calculate its accounting rate of return. Enter your answer as a whole percentage value (for example, 16%should be entered as "16").54 X %Using the accounting rate of return metric, which project should be selected: the first or the second?

Step 1: Annual net income Annual depreciation expense = $155,000/5 yearsAnnual depreciation expense…

Answered: Accounting Rate of Return WeCare Clinic…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 2CE

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please answer within the format by providing formula the detailed workingPlease provide answer in text (Without image)Please provide answer in text (Without image)Please provide answer in text (Without image) Accounting Rate of Return WeCare Clinic is planning on investing in some new echocardiogram equipment that will require an initial outlay of $175,000. The system has an expected life of five years and no expected salvage value. The investment is expected to produce the following net cash flows over its life: $73,000, $74,000, $89,000, $82,000, and $107,000. Required: 1. Calculate the annual net income for each of the five years. Net Income Year 1$ fill in the blankYear 2$ fill in the blank Year 3$ fill in the blank Year 4$ fill in the blank Year 5$ fill in the blank 2. Calculate the accounting rate of return. Enter your answer as a whole percentage value (for example, 16% should be entered as "16").___________________ % 3. What if a second competing revenue-producing…

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