Assume That the Cost of Certain Equipment That a Business

question 8

Essay

Assume that the cost of certain equipment that a business is considering purchasing is $100,000. The equipment will be depreciated over five years, at which point the salvage value is expected to be $8,000. Anticipated after-tax profits (losses) are as follows:

$\begin{array} { c c } \text { Year } & \text { After-Tax Profits/Losses } \\1 & \$ ( 10,000 ) \\2 & 20,000 \\3 & 25,000 \\4 & 35,000 \\5 & 20,000\end{array}$
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Compute the accounting return on the proposed investment.
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