Answer:
14%
Explanation:
Net cash flow = $120,000
Annual Depreciation = [(Cost + Salvage value) / Useful life]
Annual Depreciation = [($400000 + 80000) / 8 years]
Annual Depreciation = $64,000
Net Income = Net cash flows - Annual Depreciation
Net Income = $56,000
Investment amount = $400,000
Accounting rate of return = Net Income / Investment amount
Accounting rate of return = $56,000 / $400,000
Accounting rate of return = 14%
