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Which is the accounting rate of return using the average investment?

Which is the accounting rate of return using the average investment?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Hunt Ltd is considering replacing all its offset printing machinery. The cost on 1.1.X1 will be £2m. The expected economic life of the equipment will be 4 years. The company depreciates its equipment using the straight-line methods. The company expects to sell this equipment for £200,000, after the end of its useful economic life. There are expected cost savings arising from this investment of £900,000 in each of years 1 and 2 and £600,0oo in each of years 3 and 4. Which is the accounting rate of return using the average investment? Select one: О а. 33.5% o b. 27.3% о с. 12.5% o d. 15%
Transcribed Image Text:Hunt Ltd is considering replacing all its offset printing machinery. The cost on 1.1.X1 will be £2m. The expected economic life of the equipment will be 4 years. The company depreciates its equipment using the straight-line methods. The company expects to sell this equipment for £200,000, after the end of its useful economic life. There are expected cost savings arising from this investment of £900,000 in each of years 1 and 2 and £600,0oo in each of years 3 and 4. Which is the accounting rate of return using the average investment? Select one: О а. 33.5% o b. 27.3% о с. 12.5% o d. 15%
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