A project with capital expenditure of Rs.5,00,000 is expected to produce the profit (after deducting depreciation) for 4 years is 40,000, 80,000, 90,000, 30,000.
Calculate Accounting Rate of return ___________.

24 %

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20 %

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22 %

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25 %

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Solution

The correct option is D $24 %$
ARR = $\frac{A v g . a n n u a l p r o f i t t a x}{A v g . i n v e s t m e n t}$
Average investment = $\frac{i n i t i a l i n v e s t m e n t + S a l v a g e v a l u e}{2}$
$\frac{(40000 + 80000 + 90000 + 30000) / 4}{(5000000 + 0) / 2}$
= 0.24 * 100 = 24%

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A project with capital expenditure of Rs.5,00,000 is expected to produce the profit (after deducting depreciation) for 4 years is 40,000, 80,000, 90,000, 30,000.Calculate Accounting Rate of return ___________.

The correct option is D 24%ARR = Avg.annualprofittaxAvg.investmentAverage investment = initialinvestment+Salvagevalue2(40000+80000+90000+30000)/4(5000000+0)/2 = 0.24 * 100 = 24%

A project with capital expenditure of Rs.5,00,000 is expected to produce the profit (after deducting depreciation) for 4 years is 40,000, 80,000, 90,000, 30,000.
Calculate Accounting Rate of return ___________.

The correct option is D $24 %$
ARR = $\frac{A v g . a n n u a l p r o f i t t a x}{A v g . i n v e s t m e n t}$
Average investment = $\frac{i n i t i a l i n v e s t m e n t + S a l v a g e v a l u e}{2}$
$\frac{(40000 + 80000 + 90000 + 30000) / 4}{(5000000 + 0) / 2}$
= 0.24 * 100 = 24%