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What is the book or accounting rate of return

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Question - Rex Company is considering an investment in a new plant which will entail an immediate capital expenditure of $4,000,000. The plant is to be depreciated on a straight-line basis over 10 years to zero salvage value. Operating income (before depreciation and taxes) is expected to be $800,000 per year over the 10-year life of the plant. The opportunity cost of capital is 14%. Assume that there are no taxes. What is the book (or accounting) rate of return for the investment?

A. 10% C. 28%

B. 20% D. 35%

Reference no: EM133040337

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