Addison Corp

question 19

Multiple Choice

Addison Corp.is considering the purchase of a new piece of equipment.The equipment will have an initial cost of $900,000,a 6-year life,and no salvage value.If the accounting rate of return for the project is 5%,what is the annual increase in net cash flow? Ignore income taxes.

• A)$45,000
• B)$105,000
• C)$150,000
• D)$195,000

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Definitions:

Variable Costs

Costs that vary directly with the level of production or output, such as raw materials and labor.

Fixed Costs

Costs that do not change with the level of output or sales, such as rent, salaries, and insurance premiums.

Car Washes

Businesses or services dedicated to cleaning vehicles, both internally and externally, often offering various levels of service.

Variable Costs

Charges that fluctuate in accordance with the amount of output.