1. 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: $89,000, $78,000, $92,000, $88,000, and $93,000.

   Required:

   1. Calculate the annual net income for each of the five years.

   	Net Income
   Year 1	$
   Year 2	$
   Year 3	$
   Year 4	$
   Year 5	$

   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 investment has the same initial outlay and salvage value but the following cash flows (in chronological sequence): $93,000, $93,000, $93,000, $89,000, and $36,000? Calculate its accounting rate of return. Enter your answer as a whole percentage value (for example, 16% should be entered as "16").
   %

   Using the accounting rate of return metric, which project should be selected: the first or the second?

   Why might the second project be preferred over the first project?