Question - Dierks Bentley Tools Co. is considering investing in a specialized equipment costing $800,000. The equipment has a useful life of 5 years and a residual value of $100,000. Depreciation is calculated using the straight-line method. The expected net cash inflows from the investment are given below:
|
Year 1
|
$200,000
|
|
2
|
250,000
|
|
3
|
150,000
|
|
4
|
45,000
|
|
5
|
35,000
|
|
$680,000
|
What is the accounting rate of return on the investment?