Company operates a number of home improvement stores in a metropolitan area. 's management estimates that if it invests $220,000 in a new computer system, it can save $61,000 in annual cash operating costs. The system has an expected useful life of 8 years and no terminal disposal value. The required rate of return is 6%. Ignore income tax issues and assume all cash flows occur at year-end except for initial investment amounts. uses straight-line depreciation.

Transcribed image text: Elegant Home Company operates a number of home improvement stores in a metropolitan area. Elegant Home's management estimates that if it invests $220,000 in a new computer system, it can save $61,000 in annual cash operating costs. The system has an expected useful life of 8 years and no terminal disposal value. The required rate of return is 6%. Ignore income tax issues and assume all cash flows occur at year-end except for initial investment amounts. Elegant Home uses straight-line depreciation. Read the requirements. a. What is the project's accrual accounting rate of return based on net initial investment? First, select the formula labels, then enter the amounts and calculate the accrual accounting rate of return based on net initial investment. (Abbreviations used: AARR = accrual accounting rate of return; avg = average; Ol = operating income. Round your answer two decimal places, X.XX%.) Increase in expected avg annual after-tax Ol Net initial investment AARR . 220,000 % b. What is the project's accrual accounting rate of return based on average investment? First, select the formula labels, then enter the amounts and calculate the accrual accounting rate of return based on average investment. (Abbreviations used: AARR = accrual accounting rate of return; avg = average; OI = operating income. Round your answer two decimal places, X.XX%.) Increase in expected avg annual after-tax OL Average investment AARR %