Dartis Company Is Considering Investing in a Specialised Equipment Costing

question 32

Multiple Choice

Dartis Company is considering investing in a specialised equipment costing $650,000.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.
$\begin{array}{|l|l|}\hline \text { Year } 1& \$ 202,000 \\\hline 2&157,000 \\\hline 3&169,000 \\\hline 4&102,000 \\\hline 5&140,000 \\\hline &\$ 770,000\\\hline \end{array}$
What is the accounting rate of return on the investment?

• A) 12.2%
• B) 5.07%
• C) 11.08%
• D) 10.14%

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