Accounting Rate of Return WeCare Clinic is planning on investing in some new echocardiogram equipment...
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Accounting
Accounting Rate of Return
WeCare Clinic is planning on investing in some new echocardiogram equipment that will require an initial outlay of $145,000. The system has an expected life of five years and no expected salvage value. The investment is expected to produce the following net cash flows over its life: $88,000, $76,000, $84,000, $83,000, and $95,000.
Required:
1. Calculate the annual net income for each of the five years.
Net Income
Year 1
$
Year 2
$
Year 3
$
Year 4
$
Year 5
$
2. Calculate the accounting rate of return. Enter your answer as a whole percentage value (for example, 16% should be entered as "16"). %
3. What ifa second competing revenue-producing investment has the same initial outlay and salvage value but the following cash flows (in chronological sequence): $95,000, $95,000, $95,000, $88,000, and $26,500? Calculate its accounting rate of return. Enter your answer as a whole percentage value (for example, 16% should be entered as "16"). %
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