A Company Projects an Increase in Net Income of $40,000

question 75

Multiple Choice

A company projects an increase in net income of $40,000 each year for the next five years if it invests $500,000 in new equipment.The equipment has a five-year life and an estimated salvage value of $50,000.The company uses the straight-line method of depreciation.What is the annual rate of return?

• A)8%
• B)14.5%
• C)18%
• D)26.7%

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Definitions:

Aggregate Demand Curve

A graphical representation showing the relationship between the overall price level in the economy and the total demand for goods and services at that price level.

Price Level

Price Level is a measure of the average prices of goods and services in an economy at a given time, often used to assess inflation or deflation.

Inflation Rate

The percentage increase in the general price level of goods and services in an economy over a period of time.

A.W. Phillips

An economist known for describing the inverse relationship between rates of unemployment and corresponding rates of inflation, which is now known as the Phillips Curve.