Use the Information Below to Answer the Following Questions

question 24

Multiple Choice

Use the information below to answer the following questions.
Y3 Ltd is expanding its production of binoculars. The plant is expected to cost $750,000 and have a life of 5 years and a nil residual value. It will be ready for operation on 31 December 2014. The following income statement figures for the new binoculars are forecast: Depreciation has been calculated on a straight-line basis. You should assume that all cash flows occur at the end of the year in which they arise. The company's cost of capital is 10%. Ignore taxation.
-Refer to the table above. The accounting rate of return is:

• A) 30%.
• B) 50%.
• C) 80%.
• D) 40%.

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Definitions:

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Heuristic Processing

A mental shortcut that allows people to solve problems and make judgments quickly and efficiently.

Technical Jargon

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Mental Shortcuts

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