Columbia Comp. invests RM 270,000 in a project that is depreciated on a straight-line basis over three years to zero disposal value. The relevant details for the project over its 3-year life are shown below. 2 Calculate the accounting rate of return for the project. Year 1 Year 2 Year 3 Sales RM 220,000 RM 190,000 RM 200,000 Cash expenses 50,000 40,000 60,000 Depreciation 90,000 90,000 90,000 Earnings before taxes 80,000 60,000 50,000 Taxes @ 30% 24,000 18,000 15,000 Operating income after taxes 56,000 42,000 35,000
Columbia Comp. invests RM 270,000 in a project that is depreciated on a straight-line basis over three years to zero disposal value. The relevant details for the project over its 3-year life are shown below. 2 Calculate the accounting rate of return for the project. Year 1 Year 2 Year 3 Sales RM 220,000 RM 190,000 RM 200,000 Cash expenses 50,000 40,000 60,000 Depreciation 90,000 90,000 90,000 Earnings before taxes 80,000 60,000 50,000 Taxes @ 30% 24,000 18,000 15,000 Operating income after taxes 56,000 42,000 35,000
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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- Columbia Comp. invests RM 270,000 in a project that is
depreciated on a straight-line basis over three years to zero disposal value. The relevant details for the project over its 3-year life are shown below.
|
2 |
|
|
|
|
Calculate the accounting
|
|
Year 1 |
Year 2 |
Year 3 |
|
Sales |
RM 220,000 |
RM 190,000 |
RM 200,000 |
|
Cash expenses |
50,000 |
40,000 |
60,000 |
|
Depreciation |
90,000 |
90,000 |
90,000 |
|
Earnings before taxes |
80,000 |
60,000 |
50,000 |
|
Taxes @ 30% |
24,000 |
18,000 |
15,000 |
|
Operating income after taxes |
56,000 |
42,000 |
35,000 |
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