Smith & Cramer,Computer Repair,is Considering an Investment in Computer and Network

question 22

Multiple Choice

Smith & Cramer,Computer Repair,is considering an investment in computer and network equipment costing $254,000.This equipment would allow them to offer new programming services to clients.The equipment will be depreciated on the straight-line basis over an eight-year period with an estimated residual value of $60,000.Using the accounting rate of return model,what is the minimum average annual operating income that must be generated from this investment in order to achieve an 11% accounting rate of return?

• A)$6,600
• B)$21,340
• C)$31,750
• D)$27,940