A Company Is Evaluating an Investment

question 135

Essay

A company is evaluating an investment.The company uses the straight-line method of depreciation.Use the following information to compute the accounting rate of return.Show your calculations and round to one decimal place.
$\begin{array}{ll}&\text { Project }\\\text { Investment }&\$875,000 \\\text { Residual value }&0 \\\text { Operating income: }\\\text { Year 1 } & 120,000 \\\text { Year 2 } & 120,000 \\\text { Year 3 } & 120,000 \\\text { Year 4 } & 120,000 \\\text { Year 5 } & 120,000\end{array}$

---

Definitions:

Thought Processes

The mental acts involved in generating, evaluating, and utilizing information, including reasoning, problem-solving, and decision-making.

Basic Elements

Fundamental components or parts that serve as building blocks or essential factors in a system or structure.

Industrial/Organizational

A field of psychology that studies behavior in work settings, focusing on improving employee performance, motivation, and the overall health of the organization.

Subfield

A specialized area within a broader field of study, focusing on a particular subset of topics or methods.