Cardinal Company is considering an investment expected to generate an average net income after taxes of $1,300

Question:

Cardinal Company is considering an investment expected to generate an average net income after taxes of $1,300 for three years. The investment costs $30,000 and has an estimated $4,000 . Compute the accounting rate of return for this investment; assume the company uses straight-line depreciation.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...