Answer:
ARR is 11.23%
Explanation:
The formula for accounting rate of return(ARR)=Average net income/initial investment
Average net income=net income for relevant relevant years/number of years
net income for relevant years=$360,000+$360,000+$600,000+$1,080,000+$1,200,000+$2,520,000+$1,444,000=$ 7,564,000.00
number of years is 7
average net income=$ 7,564,000.00/7
=$1,080,571.43
Initial investment is $9,620,000
ARR=$1,080,571.43/ $9,620,000*100=11.23%
The average rate of return is 11.23%,the return expected on the average annually.
