Prescott Corporation Is Considering an Investment in New Equipment Costing

question 30

Multiple Choice

Prescott Corporation is considering an investment in new equipment costing $918,000.The equipment will be depreciated on a straight-line basis over a ten-year life and is expected to have a residual value of $98,000.The equipment is expected to generate net cash inflows of $152,000 for each of the first five years and $116,000 for each of the last five years.What is the accounting rate of return associated with the equipment investment? (Round your answer to two decimal places.)

• A) 10.95%
• B) 11.34%
• C) 9.05%
• D) 10.24%

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Definitions:

Hypothetical Syllogism

A deductive argument that contains two premises, at least one of which is a conditional statement.

Hypothetical Claim

A statement or assertion based on assumptions or possibilities, not necessarily on facts or reality.

Deductive Argument

A type of logical argument in which the conclusion necessarily follows from the premises if they are true.

Valid

In logic, a term describing an argument where, if the premises are true, the conclusion must also be true.