Smith & Cramer, Computer Repair, Is Considering an Investment in Computer

question 109

Multiple Choice

Smith & Cramer, Computer Repair, is considering an investment in computer and network equipment costing $240,000. 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 $50,000. 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)$5500
• B)$20,900
• C)$31,900
• D)$26,400

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Definitions:

Interneuron

A type of neuron that communicates only with other neurons, typically found within the central nervous system and plays a role in reflexes and neuronal circuits.

Arachnoid mater

A delicate membrane that is one of the three layers (meninges) surrounding the brain and spinal cord, providing protection.

Meninges

Membranes that protect the brain and spinal cord.

Subarachnoid space

The area between the arachnoid membrane and pia mater around the brain and spinal cord, filled with cerebrospinal fluid.