Peets 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 $100,000. The equipment will have an initial cost of $400,000 and have a 5-year useful life. If the salvage value of the equipment is estimated to be $75,000, what is the accounting rate of return (ignore income taxes)?

a.	6.25%
b.	8.75%
c.	25.00%
d.	26.67% Please show step by step answer.