Clapton Corporation Is Considering an Investment in New Equipment Costing

question 31

Multiple Choice

Clapton Corporation is considering an investment in new equipment costing $934,000.The equipment will be depreciated on a straight-line basis over a ten-year life and is expected to have a residual value of $90,000.The equipment is expected to generate net cash flows of $156,000 for each of the first five years and $138,000 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) 12.86%
• B) 13.30%
• C) 8.25%
• D) 12.23%

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