Chapter 15, Problem 2SEQ

### Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

Chapter
Section

### Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

# Management is considering a $100,000 investmentin a project with a five-year life and no residualvalue. If the total income from the project is expected to be$60,000 and recognition is givento the effect of straight-line depreciation on theinvestment, the average rate of return is: A. 12% B. 24% C. 60% D. 75%

To determine

Concept Introduction:

ARR:

Accounting Rate of Return (ARR) is the rate of return earned on the investment made in a project. ARR is calculated by dividing the Average Accounting profits by Average Investment.

The formula to calculate ARR is as follows:

ARR= Average Accounting profitsAverage Investment

To Calculate:

The Average Rate of Return

Explanation

The Average Rate of Return is calculated as follows:

 Expected Total Income (A) \$ 60,000 Number of years (B) 5

### Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

#### The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started