A project requires an immediate investment of $68731 in some new equipment with an estimated...
Question:
A project requires an immediate investment of $68731 in some new equipment with an estimated useful life of 10 years and no salvage value. If predicted annual savings or cash operating expenses are $12840, what is the accounting rate of return based on the original investment?
input your answer to two decimal places, for example, .12348 would be input as 12.35
Accounting Rate of Return:
Accounting rate of return is used to determine the amount of returns made from making an investment of $1. It is presented in percentage. The higher the accounting rate of return, the desirable the investment.
Answer and Explanation: 1
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View this answerThe formula to compute for the accounting rate of return is:
- Accounting rate of return = Annual savings / Initial Investment
We divide the annual...
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Using the Accounting Rate of Return Method to Evaluate a Budget
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Chapter 14 / Lesson 8
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Capital budgets are used for large projects completed over long timelines and can be evaluated using the accounting rate of return (ARR) comparing the average rate of return to investments. Learn how the desired and actual ARR are calculated and guide future budget decisions.
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