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You want to get approval for a capital expense to bring the copy service back in house. You estimate that it will bring in a
You want to get approval for a capital expense to bring the copy service back in house. You estimate that it will bring in a net cash flow of $40,000 over the next 5 years. An initial outlay of $24,000 cash will be needed to for two networked, dedicated computers, and a new copy machine to support the Release of Information Staff you already have. 1. Use straight-line deprecation in calculating the average net income and enter the information in table 6-31. The accounting rate of return needs to be at least 10% for the project to be accepted. 6-31 Accounting Rate of Return Net cash flow per year Depreciation Average net income Investment Accounting rate of return on project Accounting Rate of Return Cash flowumber of years 40,000/5=8,000 Costumber of years Net cash flow per year less depreciation Cost of project Average net income/investment 2. Will the accounting rate of return for the capital expense be acceptable
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