A Company Is Evaluating an Investment

question 85

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.
$$\begin{array} { l r } &\text { Project } \\\text { Investment } &\$875,000\\\text { Residual value }&0 \\\text { Operating income: } & \\\text { Year 1 } & 120,000 \\\text { Year 2 } & 120,000 \\\text { Year 3 } & 120,000 \\\text { Year 4 } & 120,000 \\\text { Year 5 } & 120,000 \\\end{array}$$

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Definitions:

Virtual Organization

Describes a network of independent organizations, resources, or individuals that function and appear as a single entity through the use of digital technologies.

Holacracy

A method of decentralized management and organizational governance, where decision-making is distributed to self-organizing teams rather than being centralized in a traditional management hierarchy.

Decentralized

The distribution of functions, powers, people, or things away from a central location or authority.

Self-Managing Teams

Self-Managing Teams consist of individuals who collaborate without the direct supervision of a manager, taking collective responsibility for their goals, processes, and outcomes.