Calculate the accounting rate of return

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Reference no: EM131101165

the accounting rate of return for a project is average income for a project divided by the initial investment unlike the payback period the accounting rate of return considers the profitability of an investment however like the payback period it ignores the time value of money. it may be useful as a screening measure to ensure that a new investment does not adversely debt covenants covenants may use accounting ratios that can be affected by the income reported and the level of long term assets.informationan investment requires an initial outlay of $100,000 and has a 5-year life with no salvage value the yearly cash flows are $50,000 $50,000 $60,000 $50,000 and $70,000.required:1-calculate the annual net income for each of the 5 years.2-calculate the accounting rate of return.

Reference no: EM131101165

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