The most important methods of capital budgeting are:1. Accounting rate of return2. Recovery period3. Profitability index4. Net Present Value5. Internal Rate of ReturnThe accounting rate of return is the rate of return on net income from the proposed capital investment. The formula accounting rate of return is calculated using the following formula: ARR = Average accounting profit Average investment Average accounting profit is the arithmetic average of the expected accounting income during each year of the project life . The average investment can be calculated as the sum of the beginning and ending book value of the project divided by 2. Another variation of the ARR formula uses the initial investment instead of the average investment. generate an annual cash flow of $32,000 for 6 years. Depreciation is allowed on a straight-line basis. It is estimated that the project will generate a scrap value of $10,500 at the end of year 6. Calculate your accounting rate of return assuming that there are no other expenses on the project.