Nelson Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $132,625. The equipment will have an initial cost of $470,000 and have a 5 year life. If the salvage value of the equipment is estimated to be $130,000, what is the accounting rate of return? Ignore income taxes.

Multiple Choice

a.29.89%.

b.11.25%

c.13.75%.

d. 28.22%.