Question

ABC Company has gathered the following information related
to an investment in new equipment:

annual net cash inflows .......................   $ 38,230
initial investment ............................   $180,000
life of new equipment .........................   10 years
salvage value of new equipment in 10 year .....   $ 20,000
cost of capital ...............................   10%

If the new equipment is purchased, the old equipment that is
currently in use can be sold for $9,000.

Calculate the accounting rate of return on the new equipment.
Enter your answer as a whole number. For example, if you come
up with 10% as the accounting rate of return, simply enter
10 as your answer. Do not enter your answer as a decimal
or with a percentage symbol (so do not enter .10 or 10%).

Answer 1

Please note Accounting rate of return can be calcuated based on initial investment and average investment as well.

Answer is given both way of calcuation below.