Sayer Tool Co A) 00645
B) 0

Sayer Tool Co. is considering investing in specialized equipment costing $610,000. The equipment has a useful life of five years and a residual value of $69,000. Depreciation is calculated using the straight-line method. The expected net cash inflows from the investment are given below. What is the Accounting Rate of Return on the investment? $$\begin{array} { | c c | } \hline \text { Year } & \\\hline 1 & \$ 210,000 \\\hline 2 & \$ 159,000 \\\hline 3 & \$ 160,000 \\\hline 4 & \$ 95,000 \\\hline 5 & \$ 136,000 \\\hline \text { Total } & \$ 760,000 \\\hline\end{array}$$

A) 0.0645
B) 0.129
C) 0.1436
D) 0.1619

Correct Answer:

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