Answered: QUESTION) Calculate the Accounting Rate…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter12: Capital Investment Decisions

Section: Chapter Questions

Problem 53P

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Question

Use the information provided to answer the questions.
Use the information provided below to calculate the following. Where applicable, use the present
value tables provided in APPENDICES 1 and 2 that appear after QUESTION 5.

QUESTION) Calculate the Accounting Rate of Return (on average investment) of Project B (expressed to two
decimal places).

INFORMATION

Zeda Enterprises has the option to invest in machinery in projects A and B but finance is only available to invest in
one of them. You are given the following projected data:
Project A Project B
Initial cost R300 000 R300 000
Scrap value R40 000 0
Depreciation per year R52 000 R60 000
Net profit
Year 1 R20 000
Year 2 R30 000
Year 3 R50 000
Year 4 R60 000
Year 5 R10 000
Net cash flows
Year 1 R90 000
Year 2 R90 000
Year 3 R90 000
Year 4 R90 000
Year 5 R90 000

Additional information
The discount rate used by the company is 12%.

Transcribed Image Text:Number of Periods 1 2 3 4 5 6 7 8 m 10 11 12 13 14 15 1% 2% 0.9901 0.9804 0.9709 3% 3.9020 3.8077 3.7171 筑 2.9410 2.8839 2.8286 2.7751 2.7232 2.6730 0.9615 0.9524 0.9434 1.9704 1.9416 1.9135 1.8861 1.8594 1.8334 1.8080 5% 7.6517 7.3255 7.0197 6.7327 11.2551 10.5753 6% 4.8534 4.7135 4.5797 4.4518 4.3295 4.2124 4.1002 13.0037 12.1062 8.5660 8.1622 7.7861 7.4353 7.1078 10.3676 9.7868 9.2526 8.7605 12.1337 11.3484 10.6350 9.9856 7% 0.9346 9.9540 9.3851 B.B633 3.6299 3.5460 3.4651 3.3872 3.3121 3.2397 3.1699 6.8017 6.7282 6.4720 6.2303 6.0021 5.7864 5.5824 5.3893 5.2064 5.0330 4.8684 11.2961 10.5631 9.8986 8% 0.9259 8.3838 9.3936 8.8527 1.7833 6.4632 6.2096 5.9713 5.7466 5.5348 5.7955 5.6014 5.4172 5.2421 5.0757 4.9173 4.7665 4.6229 4.4859 4.3553 4.2305 4.1114 9% 8.3577 10% 0.9174 0.9091 3.9927 3.8897 3.7908 9.4713 8.9826 8.5302 8.1109 7.7217 7.3601 7.0236 6.7101 6.4177 6.1446 5.8892 8.3064 7.8869 7.4987 7.1390 6.8052 6.4951 7.9427 7.5361 1.7591 1.7355 1.7125 7.9038 9.2950 8.7455 8.2442 13.8651 12.8493 11.9379 11.1184 10.3797 9.7122 9.1079 8.5595 11% 0.9009 7.1607 6.8137 2.6243 2.5771 2.5313 2.4869 2.4437 2.4018 2.3612 2.3216 2.2832 2.2459 2.2096 2.1743 2.1399 2.1065 12% 0.8929 13% 0.8850 3.6959 3.6048 3.5172 3.4331 6.4924 14% 7.4869 7.1034 6.7499 0.8772 1.6901 1.6681 1.6467 7.7862 7.3667 6.9819 8.0607 7.6061 7.1909 15% 0.8696 16% 3.1024 3.0373 2.9745 2.9137 2.8550 2.7982 2.7432 2.6901 2.6386 2.5887 6.5152 6.2469 5.9952 5.7590 5.5370 5.3282 5.1317 4.9464 4.7716 4.6065 4.4506 4.3038 0.8621 0.8547 17% 4.7122 4.5638 4.4226 4.2883 4.1604 4.0386 3.9224 1.6257 1.6052 1.5852 1.5656 1.5465 1.5278 5.3349 5.1461 4.9676 4.7988 4.6389 4.4873 4.3436 4.2072 4.0776 3.9544 3.8372 18% 6.2065 5.9377 5.6869 5.4527 5.2337 5.0286 4.8364 3.3522 3.2743 3.1993 3.1272 3.0576 2.9906 0.8475 0.8403 0.8333 3.9975 3.8887 3.7845 3.6847 3.5892 3.4976 3.4098 3.3255 5.6502 5.4262 5.2161 5.0188 4.8332 4.6586 19% 20% 6.6282 6.3025 6.0021 5.7245 5.4675 38115 6.8109 6.4624 6.1422 5.8474 5.5755 4.4941 3.7057 3.6046 6.1944 5.9176 5.6603 5.4206 5.1971 4.9884 4.7932 4.6105 4.4392 5.2293 5.0081 4.1633 4.0310 4.6560 4.4865 4.3271 6.4235 6.1218 5.8424 5.5831 5.3423 5.1183 4.9095 4.7147 4.5327 5.3242 5.0916 4.3389 4.1925 4.8023 4.6106 4.8759 4.6755

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