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bekas [8.4K]
2 years ago
12

Nelson Corp is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annu

al increase in cash flow of $100,000. The equipment will have an initial cost of $400,000 and have a 5 year life. If the salvage value of the equipment is estimated to be $75,000, what is the accounting rate of return
Business
1 answer:
Katyanochek1 [597]2 years ago
3 0

Answer:

14.74 %

Explanation:

Accounting rate of return = Average Profits / Average Investment x 100

therefore,

Accounting rate of return = ($100,000 - $65,000) / $237,500 x 100

                                           = 14.74 %

where,

Average Investment = ( initial investment + scrape value ) ÷ 2

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Answer:

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Ending Merchandise Inventory is value of closing inventory in hand, to be valued at lower of cost or net realizable value or replacement value

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Since current realizable/ replacement value = $1,155

Cost is less than realizable value, therefore cost will be considered.

Thus ending merchandise inventory will be valued at total of $1,120.

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