B4. The initial outlay for new equipment costs $340,000 and it has a salvage value of...

 

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B4. The initial outlay for new equipment costs $340,000 and it has a salvage value of $20,000 after four years. Annual net cash flow per year is $160,000 per annum and depreciation is $80,000 per annum. There are no other expenses. (i) Calculate the accounting rate of return based upon the average investment method. (ii) Briefly outline two weaknesses of the accounting rate of return methodology of project evaluation. (iii) What is the payback period for this project? B4. The initial outlay for new equipment costs $340,000 and it has a salvage value of $20,000 after four years. Annual net cash flow per year is $160,000 per annum and depreciation is $80,000 per annum. There are no other expenses. (i) Calculate the accounting rate of return based upon the average investment method. (ii) Briefly outline two weaknesses of the accounting rate of return methodology of project evaluation. (iii) What is the payback period for this project?

Answer rating: 100% (QA)

1 New casts 340000 Salvage value 20000 Annual cash flow per year 16... View the full answer