Use the Following Information to Answer the Next Question(s)

question 29

Multiple Choice

Use the following information to answer the next question(s) .
Sunny Flowers is considering the purchase of a small business that costs $500,000. Sunny plans to sell stock valued at $250,000. The stock would pay dividends of $20,000 per year. Sunny would borrow the remaining $250,000 from a local bank at 12 percent interest.
The business is expected to generate annual cash inflows of $80,000. Duane plans to operate the business for 15 years and then turn it over to his son.
-If the depreciation is $25,000 per year, the accounting rate of return based on the initial investment is

• A) 11%.
• B) 12%.
• C) 16%.
• D) 17.2%.

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Definitions:

Near-Sourcing

The practice of transferring a business operation or project closer to where it is consumed or where the product is sold, aiming to reduce transportation costs and time.

Intermodal Transportation

The movement of goods in one and the same loading unit or vehicle by successive modes of transport without handling the goods themselves in changing modes.

Contract Carrier

A transportation service provider for hire that enters into an agreement with specific customers to transport goods or passengers.

Push Strategy

A marketing approach where a company "pushes" its products to consumers through advertising and promotion strategies.