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ABC Company uses the accounting rate of return to help in making capital investment decisions....

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Accounting

ABC Company uses the accounting rate of return to help in making capital investment decisions. They give you the following information about the purchase of a new plant. The plant, a depreciable asset, has a 10-year life, will cost 500,000 with zero salvage value

Cash revenue minus cash expenses

years 1-3 100,000 each year

years 4-7 200,000 each year

years 8-10 400,000 each year

Accounting Rate of return for the plant will be:

A. 26%

B. 20%

C. 46%

D. 36%

E. Cannot be determined

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