Bowen Is Considering the Purchase of Equipment Costing $150,000

question 34

Multiple Choice

Bowen is considering the purchase of equipment costing $150,000.The equipment has a 12- year useful life, has an estimated salvage value of zero, and is expected to generate $25,000 in annual cash flows.The company has a 10% required rate of return and uses the straight-line depreciation method.The accounting rate of return on this equipment is closest to

• A)1.6%.
• B)8.3%.
• C)10%.
• D)25%.

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Definitions:

Terracing

An agricultural practice of creating terraces on steep slopes to reduce soil erosion and water runoff, while making steep land more usable for farming.

Wind Erosion

The process of removing soil particles by wind, leading to land degradation and a loss of soil fertility.

Canadian Prairies

A vast geographical region in Western Canada known for its flat terrain and grassy landscapes, crucial for agriculture and home to many species of plants and animals.

Cultivated Land

Land that has been prepared and used for crop production through plowing, sowing, and managing crops.