Question

Carmel Corporation is considering the purchase of a machine costing $52,000 with a 4-year useful life and no salvage value. Carmel uses straight-line depreciation and assumes that the annual cash inflow from the machine will be received uniformly throughout each year. In calculating the accounting rate of return, what is Carmel's average inv

Answer 1

$26,000

Step-by-step explanation:

Average investment = (Initial investment + Salvage value) / 2

Average investment = ($52,000 + $0) / 2

Average investment = $52,000 / 2

Average investment = $26,000

So, Carmel's average investment is $26,000.