Exercise 11-5 (Algo) Accounting rate of return LO P2

Information for two alternative projects involving machinery investments follows:

	Project 1	Project 2
Initial investment	$ (135,000)	$ (105,000)
Salvage value	0	15,000
Annual income	16,875	15,600

1. Compute accounting rate of return for each project.
2. Based on accounting rate of return, which project is preferred?

Required A Required B Compute accounting rate of return for each project. Project 1 Project 2 Numerator: Accounting Rate of Return Denominator: < Required A Required B > Accounting rate of return