Carmel Corporation is considering the purchase of a machine costing $41,000 with

Question

Carmel Corporation is considering the purchase of a machine costing $41,000 with a 8-year useful life and no salvage value. Carmel uses straight-line depreciation and assumes that the annual cash inflow from the machine will be received uniformly throughout each year. In calculating the accounting rate of return, what is Carmel's average investment $41,000. $23,063. $20,500. $5,766 The following data concerns a proposed equipment purchase: The annual average investment amount used to calculate the accounting rate of return is: $81,500 $79,000 $40,750 $84,000

Explanation / Answer

Average investment=(41000-0)/2

=20500

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