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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: $81,000, $89,000, $83,000, $93,000, and $94,000.

Required:

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

	Net Income
Year 1	$fill in the blank 1
Year 2	$fill in the blank 2
Year 3	$fill in the blank 3
Year 4	$fill in the blank 4
Year 5	$fill in the blank 5

2. Calculate the accounting rate of return. Enter your answer as a whole percentage value (for example, 16% should be entered as "16"). fill in the blank 6 %

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): $94,000, $94,000, $94,000, $81,000, and $38,500? Calculate its accounting rate of return. Enter your answer as a whole percentage value (for example, 16% should be entered as "16"). fill in the blank 7 %