Problem:
Delta Mu Delta is considering purchasing some new equipment costing $400,000. The equipment will be depreciated on a straight-line basis to a zero book value over the four-year life of the project. Projected net income for the four years is $18,900, $21,300, $26,700, and $25,000.
Required:
What is the average accounting rate of return?
It is one of the following:
- 11.49 percent
- 11.63 percent
- 12.01 percent
- 12.49 percent
- 13.20 percent