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Fargo Corp.is considering the purchase of a new piece of equipment.The equipment costs $50,000 and will have a salvage value of $5,000 after nine years.Using the new piece of equipment will increase Fargo's annual cash flows by $6,000.Fargo has a hurdle rate of 12%.
a.How much is Fargo's annual depreciation on the equipment?
b.What is Fargo's projected annual increase in net income?
c.What is the accounting rate of return for purchasing the new piece of equipment?
d.Based on financial factors,should Fargo purchase the new equipment? Why or why not?
Analytic Ability
The skill to study or determine the nature of a problem or subject by breaking it down into its smaller parts.
Sternberg
Refers to Robert Sternberg, an American psychologist known for his theories on intelligence and creativity.
Objective Tests
Assessments that have fixed answers and are scored without bias, often in the form of multiple-choice, true/false, or fill-in-the-blank questions.
Stanford-Binet Test
A standardized intelligence test used to measure cognitive abilities and intellectual potential in individuals.
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