Question
Scarborough Oil Co. must make a choice between two investments: Del Rio at a cost of $300,000 or Laredo at a cost of $275,000. Given
Scarborough Oil Co. must make a choice between two investments: Del Rio at a cost of $300,000 or Laredo at a cost of $275,000. Given the following information, calculate the accounting rate of return. (Round percentage answer to two decimal places and include %.) Which investment should Scarborough choose?
| Year | Del Rio | Laredo |
| 1 | $22,000 | $21,000 |
| 2 | $15,000 | $21,000 |
| 3 | $23,000 | $21,000 |
| 4 | $22,000 | $21,000 |
| 5 | $21,000 | $21,000 |
| 6 | $20,000 | $21,000 |
| Total | $123,000 | $126,000 |
Calculate ARR for Del Rio (round to two decimal places and include %):
Calculate ARR for Laredo (round to two decimal places and include %):
Based on ARR, which investment should Scarborough choose, Del Rio or Laredo?:
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Intermediate Accounting
Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas
9th Edition
125972266X, 9781259722660
