Question
Dierks Bentley Tools Co. is considering investing in a specialized equipment costing $800,000. The equipment has a useful life of 5 years and a residual
Dierks Bentley Tools Co. is considering investing in a specialized equipment costing $800,000. The equipment has a useful life of 5 years and a residual value of $100,000. Depreciation is calculated using the straight-line method. The expected net cash inflows from the investment are given below:
| Year 1 | $200,000 |
| 2 | 250,000 |
| 3 | 150,000 |
| 4 | 45,000 |
| 5 | 35,000 |
| $680,000 |
What is the accounting rate of return on the investment?
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Managerial Accounting Tools for Business Decision Making
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, Ibrahim M. Aly
4th Canadian edition
1118856996, 978-1118856994
