Newport Corp is considering the purchase of a new piece of equipment. The cost savings...
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Accounting
Newport Corp is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $200,000. The equipment will have an initial cost of $900,000 and have a 6 year life. There is no salvage value for the equipment. What is the accounting rate of return? Ignore income taxes.
A. 5.56%
B. 16.67%
C. 22.22%
D. 44.44%
Please show your work on the calculations!
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