Q1 A company is evaluating three possible investments. Each uses the straight-line method of depreciation. Following information is provided by the company: Project A $230,000 Project B Project C $54,000 12,000 Investment $230,000 36,000 Residual value Net cash flows: Year 1 56,000 56,000 56,000 56,000 56,000 38,000 29,000 25,000 22,000 94,000 64,000 74,000 34,000 Year 2 Year 3 Year 4 Year 5 What is the accounting rate of return for Project B? (Round your answer to two decimal places.
Q1 A company is evaluating three possible investments. Each uses the straight-line method of depreciation. Following information is provided by the company: Project A $230,000 Project B Project C $54,000 12,000 Investment $230,000 36,000 Residual value Net cash flows: Year 1 56,000 56,000 56,000 56,000 56,000 38,000 29,000 25,000 22,000 94,000 64,000 74,000 34,000 Year 2 Year 3 Year 4 Year 5 What is the accounting rate of return for Project B? (Round your answer to two decimal places.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Q1 A company is evaluating three possible investments. Each uses the straight-line method of depreciation . Following information is provided by the company:
Q2 Martin Production Co. is considering investing in specialized equipment costing $975,000. The equipment has a useful life of five years and a residual value of $75,000. Depreciation is calculated using the straight-line method. The expected net cash inflows from the investment are given below:
Transcribed Image Text:Q1 A company is evaluating three possible investments. Each uses the straight-line method of
depreciation. Following information is provided by the comnpany:
Project A Project B Project C
$54,000
12,000
$230,000
$230,000
36,000
Investment
Residual value
Net cash flows:
Year 1
56,000
56,000
56,000
56,000
56,000
38,000
29,000
25,000
22,000
94,000
64,000
74,000
34,000
Year 2
Year 3
Year 4
Year 5
What is the accounting rate of return for Project B? (Round your answer to two decimal places.
Q2 Martin Production Co. is considering investing in specialized equipment costing $975,000. The
equipment has a useful life of five years and a residual value of $75,000. Depreciation is calculated
using the straight-line method. The expected net cash inflows from the investment are given below:
Year 1
$275,000
Year 2
220,000
Year 3
200,000
Year 4
200,000
Year 5
180,000
$1,075,000
Compute the accounting rate of return on the investment, Show your calculations.
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