Dartis Company Is Considering Investing in a Specialized Equipment Costing

question 41

Multiple Choice

Dartis Company is considering investing in a specialized equipment costing $600,000. The equipment has a useful life of 5 years and a residual value of $60,000. Depreciation is calculated using the straight-line method. The expected net cash inflows from the investment are given below. $$\begin{array} { | c | r | } \hline \text { Year 1 } & \$ 200,000 \\\hline 2 & 150,000 \\\hline 3 & 160,000 \\\hline 4 & 95,000 \\\hline 5 & 75,000 \\\hline & \$ 680,000 \\\hline\end{array}$$ What is the accounting rate of return on the investment?

• A) 7.95%
• B) 8.78%
• C) 8.48%
• D) 9.25%

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