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Misty-Blue Limited is considering an investment in equipment which is needed to ensure the continued...

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Accounting

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Misty-Blue Limited is considering an investment in equipment which is needed to ensure the continued success of its operations. This equipment will be acquired at a cost of R78 000 . The equipment will have a useful life of 5 years, during which it will generate the following cash inflows: Depreciation is calculated on the straight-line method. The residual value of the equipment at the end of its useful life is nil. Misty-Blue Limited's required rate of return is 12%. REQUIRED 10.1 Calculate the Accounting Rate of Return. 10.2 Recommend to Misty-Blue Limited if the project should be accepted or not and give a reason for your

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