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Which is the righ way to calculate accounting rate of return

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Reference no: EM132757375

Problem 1: Which is the righ way to calculate Accounting rate of return with the following data?

initial investment required - 2,000,000

residual value - 20,500

operating costs ( as % of revenue) 30%

working capital required in year 1 - 120,000

working capital released in year 5 - 15,000

year 1 - 800,000

year 2 - 900,000

year 3 - 1,000,000

year 4 - 1,100,000

year 5 - 1,200,000

Duration 5 years

Tax rate 20%

Rate of return 20%

Straight line method depreciation

Reference no: EM132757375

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