A company purchases a non-current asset with a useful economic life of ten years for $1.25 million. It is expected to generate cash flows over the ten year period of $250,000 per annum before depreciation. The company charges depreciation over the life of the asset on a straight-line basis. At the end of the period it will be sold for $250,000.

What is the accounting rate of return for the investment (based on average profits and average investment)?

Answer rating: 100% (QA)

The accounting rate of return ARR for an investment is calculated by dividing the average annual acc... View the full answer