Johnson Whole Distributors Is Anticipating Investing in Equipment That Cost

question 59

Multiple Choice

Johnson Whole Distributors is anticipating investing in equipment that cost $120,000.The equipment has an 8-year life and no salvage value.Johnson uses straight-line depreciation.The equipment has a payback period of 5 years.The accounting rate of return is closest to

• A)5%.
• B)6.25%.
• C)7.8%.
• D)7.5%.

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Definitions:

Phillips Curves

The economic theory suggesting an inverse relationship between inflation and unemployment rates over the short-term.

Expected Inflation

The rate of inflation that consumers, businesses, and investors anticipate will occur in the future, which can influence economic behavior in the present.

Phillips Curve

An economic theory that suggests an inverse relationship between the rate of unemployment and the rate of inflation in an economy.

Sacrifice Ratio

A measure of the economic costs of reducing inflation, often represented by the loss of output or employment.