The Following Data Concerns a Proposed Equipment Purchase -
the Annual Average Investment Amount Used to Calculate the |

question 15

Multiple Choice

The following data concerns a proposed equipment purchase: $\begin{array} { | l | l | } \hline \text { Cost } & \$ 144,000 \\\hline \text { Salvage value } & \$ 4,000 \\\hline \text { Estimated useful life } & 4 \text { years } \\\hline \text { Annual net cash flows } & \$ 46,100 \\\hline \text { Depreciation method } & \text { Straight-line } \\\hline\end{array}$
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The annual average investment amount used to calculate the accounting rate of return is:

• A) $48,950
• B) $72,000
• C) $70,000
• D) $37,000
• E) $74,000

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Definitions:

Prudent Person

A legal standard referring to the conduct of a hypothetical reasonable individual under specific circumstances.

Insurance Coverage

The amount and type of protection provided by an insurance contract against various risks, losses, or damages.

Careless Conduct

Negligent or reckless behavior that fails to consider the safety or wellbeing of others, potentially leading to harm or damage.

Negligence

The failure to take reasonable care to avoid causing injury or loss to another person, resulting in legal liability for the resulting harm.