00:01
For the given question, the estimated accounting rate of return is calculated using the formula.
00:08
The estimated accounting rate of return is calculated by using the formula that is accounting rate of return equal to average annual accounting profit annual accounting profit divided by average investment into 100.
01:06
So, where we have the values given that is average annual accounting profit is expected annual profit which is given as one lakh thirty four thousand dollars and average investment is the average investment in the project it is calculated as the initial cost of the equipment minus the salvage value all divided by two.
01:42
So, let's calculate the average investment equals to initial cost minus salvage value divided by two.
01:54
So, we have the initial cost equals to five lakh thirty thousand and the salvage value is zero dollars as there is no salvage value.
02:11
So, the average investment equals to five lakh thirty thousand dollars minus zero dollars all divided by two we get five lakh thirty thousand dollars divided by two equals to two lakh sixty five thousand dollars is the average investment.
02:38
So, we have the average investment value.
02:42
Now, we can calculate the accounting rate of return equals to a r to return equal to one lakh thirty four thousand divided by two lakh sixty five thousand into hundred...