Sawyer & Cecil,Computer Consultants,is Considering an Investment in Computer and Network

question 130

Multiple Choice

Sawyer & Cecil,Computer Consultants,is considering an investment in computer and network equipment costing $254,000.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 $60,000.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 a 12% accounting rate of return?

• A)$7,200
• B)$23,280
• C)$30,480
• D)$31,750

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