Dazzle Company Uses Straight-Line Depreciation and Is Considering a Capital

question 101

Multiple Choice

Dazzle Company uses straight-line depreciation and is considering a capital expenditure for which the following relevant cash flow data have been estimated: $$\begin{array} { | l | r | } \hline \text { Estimated useful life: } & \text { 3 years } \\\hline \text { Initial investment: } & \$ 500,000 \\\hline \text { Savigs year l: } & \$ 200,000 \\\hline \text { Savigs year 2: } & \$ 150,000 \\\hline \text { Saviggs year 3: } & \$ 225,000 \\\hline \text { Residual value after 3 yrs } & \$ 20,000 \\\hline\end{array}$$
- The accounting rate of return is closest to:

• A)38.33%.
• B)32.00%.
• C)6.33%.
• D)5.51%.

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