Clapton Corporation Is Considering an Investment in New Equipment Costing

question 29

Multiple Choice

Clapton Corporation is considering an investment in new equipment costing $918,000.The equipment will be depreciated on a straight-line basis over a ten-year life and is expected to have a residual value of $98,000.The equipment is expected to generate net cash flows of $152,000 for each of the first five years and $116,000 for each of the last five years.What is the accounting rate of return associated with the equipment investment? (Round your answer to two decimal places. )

• A)10.95%
• B)11.34%
• C)9.05%
• D)10.24%

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Definitions:

Renewable Natural Resources

Things such as forests, water in reservoirs, and wildlife that are capable of growing back or building back up (renewing themselves) if they are harvested at moderate rates.

Natural Capital

The world's stock of natural resources, including geology, soils, air, water, and all living organisms, which provide goods and services that support the economy and life.

Nonrenewable Natural Resource

Things such as oil, natural gas, and metals, that are either in actual fixed supply or that renew so slowly as to be in virtual fixed supply when viewed from a human time perspective.

Timber

Wood that has been processed into beams and planks, a stage in the production of materials for building and furniture making.