Gunslinger Company Is Considering the Purchase of Pipe Cutting Equipment

question 87

Multiple Choice

Gunslinger Company is considering the purchase of pipe cutting equipment. Data on the equipment are as follows: $$\begin{array} { l r } \text { Original investment } & \$ 35,000 \\\text { Net annual cash inflow } & \$ 8,000 \\\text { Expected economic life in years } & 5 \\\text { Salvage value at the end of five years } & \$ 3,500\end{array}$$ The company uses the straight-line method of depreciation with no mid-year convention. What is the accounting rate of return on original investment rounded to the nearest percent, assuming no taxes are paid?

• A)22.86%
• B)2.86%
• C)18%
• D)4.86%

---

Definitions:

Outer Planets

The planets in the Solar System located beyond the asteroid belt, including Jupiter, Saturn, Uranus, and Neptune, characterized by their large sizes and gaseous compositions.

Jupiter

The largest planet in our solar system, known for its prominent storms including the Great Red Spot, and having a composition dominated by hydrogen and helium.

Mars

Fourth planet out from the Sun.

Creative Leap Approach

An innovative methodology that involves thinking outside the box to solve problems or generate new ideas.