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Find the average accrual accounting rate of return

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Question - Tamaraw Company is negotiating to purchase equipment that would cost P200,000, with the expectation that P40,000 per year could be saved in after-tax cash costs if the equipment were acquired. The equipments estimated useful life is 10 years, with no salvage value, and would be depreciated by the straight-line method. Tamaraws minimum desired rate of return is 12 percent. Present value of an annuity of 1 at 12 percent for 10 periods is 5.65. Present value of 1 due in 10 periods at 12 percent is 0.322.

Required - Find the average accrual accounting rate of return during the first year of assets?

Reference no: EM132576408

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