Clapton Company Is Considering an Investment in New Equipment Costing

question 20

Multiple Choice

Clapton Company is considering an investment in new equipment costing $934,000.The equipment will be depreciated on a straight-line basis over a 10-year life and is expected to have a salvage value of $110,000.The equipment is expected to generate net cash flows of $152,000 for each of the first five years and $108,000 for each of the last five years.What is the accounting rate of return associated with the equipment investment?

• A) 10.38%
• B) 9.91%
• C) 9.12%
• D) 10.03%

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