The net cash inflow per year is 120,000 – 30,000 = 90,000. The depreciation per year = (300,000 – 20,000)/5 = 56,000 Therefore the profit per year = 90,000 – 56,000 = $34,000.
The average investment over the period is (300,000 + 20,000) / 2 = $160,000.
Therefore the ARR = 34,000/160,000 = 21% (to the nearest %)