A company has a target accounting rate of return of 20% and is now considering the following project. Capital cost of asset K80,000 Estimated life 4 years Estimated profit before depreciation K Year 1 20,000 Year 2 25,000 Year 3 35,000 Year 4 25,000 The capital asset would be depreciated by 25% of its cost each year, and will have no residue value. You are required to assess whether the project should be undertaken?

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To assess whether the project should be undertaken we need to calculate the accounting rate of retur... View the full answer