LaGrange Corp. has forecasted that over the next four years the average annual after-tax income will be $45,731. The average book value of the manufacturing equipment that is used is $167,095. What is the accounting rate of return? (Round your answer to one decimal place.)
A) 33.3%
B) 27.4%
C) 29.8%
D) 22.3%

Question

Quizplus · Accepted Answer

To calculate the accounting rate of return, we need to divide the average annual after-tax income by the average book value of the manufacturing equipment. 
Accounting Rate of Return = (Average Annual After-Tax Income / Average Book Value of Manufacturing Equipment) x 100%
= ($45,731 / $167,095) x 100%
= 0.2737 x 100%
= 27.4%
Therefore, the accounting rate of return is 27.4%, and the best choice is B.