Calculate accounting rate of return

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Question - Crane Corp. management is considering purchasing a machine that will cost $117,250 and will be depreciated on a straight-line basis over a five-year period. The sales and expenses (excluding depreciation) for the next five years are shown in the following table. The company's tax rate is 34 percent.


Year 1

Year 2

Year 3

Year 4

Year 5

Sales

$127,450

$176,875

$247,455

$254,440

$271,125

Expenses

$141,410

$128,488

$137,289

$145,112

$139,556

Crane will accept all projects that provide an accounting rate of return (ARR) of at least 45 percent.

Required - Calculate accounting rate of return.

Reference no: EM133162581

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