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

question 82

Multiple Choice

Use the information below to answer the following question(s) .Saturn Ltd.wants to automate one of its production processes.The new equipment will cost $180,000.In addition, Saturn will incur installation and testing costs of $5,000 and $8,500 respectively.The expected life of the equipment is 8 years and the salvage value of the equipment is estimated at $18,000.The annual cash savings are estimated at $32,000.The company uses straight-line depreciation and has a required rate of return of 14%.Ignore income taxes.
-What is the accrual accounting rate of return for the investment Saturn Ltd.is considering?

• A)5.2%
• B)16.5%
• C)4.0%
• D)5.9%
• E)11.0%

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Definitions:

Liquidity

The ability of an asset to be quickly converted into cash without significant loss in value, or a company's ability to meet its short-term obligations.

IFRS

International Financial Reporting Standards, a set of accounting guidelines providing a global framework for financial statements.

Commercial and Tax Law Approach

Pertains to the legal frameworks and interpretations that govern the conduct of businesses and the calculation of taxes.

Global Sources of Capital

Various international avenues and mechanisms through which businesses can secure funding for operations or expansion.