What is the minimum average annual operating income

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Reference no: EM13129042

Johnsons Construction is considering an investment in equipment costing $660,000. The equipment will be depreciated on the straight-line basis over an 8 year period with an estimated residual value of $120,000. Using the accounting rate of return model, what is the minimum average annual operating income that must be generated from this investment in order to achieve a 6.38% accounting rate of return?

1) 18,900
2) 37,800
3) 92,400

Reference no: EM13129042

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