Software Hub Is Deciding Whether to Purchase New Accounting Software

question 5

Multiple Choice

Software Hub is deciding whether to purchase new accounting software. The cost of the software package is $55,000, and its expected life is 10 years. The payback for this investment is four years. Assuming equal yearly cash flows, what are the expected annual net cash savings from the new software? (Assume the investment has zero salvage value.)

• A)$5,500
• B)$37,800
• C)$13,750
• D)$220,000

---

Definitions:

Return on Investment

A financial metric measuring the profitability of an investment, calculated as net profit divided by the cost of the investment.

Responsibility Centers

Responsibility centers are parts of an organization treated as separate units for the purpose of assigning and evaluating financial performance.

Evaluating Performance

The process of assessing the effectiveness and efficiency of operations, employees, or processes.

Managers

Individuals responsible for planning, directing, and overseeing the operations and employees within an organization to achieve its objectives.