Newport Corp

question 60

Multiple Choice

Newport Corp.is considering the purchase of a new piece of equipment.The cost savings from the equipment would result in an annual increase in cash flow of $200,000.The equipment will have an initial cost of $900,000 and have a 6-year life.There is no salvage value for the equipment.What is the accounting rate of return? Ignore income taxes.

• A)5.56%
• B)16.67%
• C)22.22%
• D)44.44%

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Definitions:

Cost Function

A mathematical relation that calculates the cost of producing a given level of output, incorporating both fixed and variable costs.

Cartel Arrangement

A formal agreement among competing firms in an industry to control prices, limit production, or divide markets, usually to enhance profits.

Manufacturing Plant

A facility where goods are produced or assembled through a combination of human labor, machinery, and technological processes.

Demand Curve

A graph showing the relationship between the price of a good and the quantity of that good which consumers are willing to purchase at various prices.