Please show the way you calculated everything in the task. Example: the accounting rate of returnA company has a target accounting rate of return of 20% (using the CIMA definition above), and is nowconsidering the following project.Capital cost of assetEstimated life$80,0004 yearsEstimated profit before depreciation$20,000$25,000$35,000$25,000Year 1Year 2Year 3Year 4The capital asset would be depreciated by 25% of its cost each year, and will have no residual value.RequiredAssess whether the project should be undertaken.

ARR means accounting rate of return which denotes the rate of return which will be earned by the…

Answered: The capital asset would be depreciated…

The capital asset would be depreciated by 25% of its cost each year, and wili have no residual value. Required Assess whether the project should be undertaken.

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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Question

Please show the way you calculated everything in the task.

Example: the accounting rate of return
A company has a target accounting rate of return of 20% (using the CIMA definition above), and is now
considering the following project.
Capital cost of asset
Estimated life
$80,000
4 years
Estimated profit before depreciation
$20,000
$25,000
$35,000
$25,000
Year 1
Year 2
Year 3
Year 4
The capital asset would be depreciated by 25% of its cost each year, and will have no residual value.
Required
Assess whether the project should be undertaken.

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