Alpha zeta is considering purchasing some new equipment

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Alpha Zeta is considering purchasing some new equipment costing pound 390,000. 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 pound 18, 900, pound 21, 300, pound 26, 700, and pound 25,000. What is the average accounting rate of return? How would your answer change if the new equipment was depreciated by pound 90,000 a year rather than depreciated to zero at the end of the project?

Reference no: EM131576632

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