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Compute the accounting rate of return

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Question - Mermaid Enterprises, a manufacturing firm, is considering investing $420,000 in a new machine. It is estimated that the net cash flow per year will be $150,000 and the machine will have a 5-year useful life. The residual value expected at the end of the 5-year life is $80,000. Compute the accounting rate of return?

a. 35.7%

b. 19.5%

c. 32.8%

d. Unable to be determined from the information given

e. 60%

Reference no: EM132571790

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