The Following Data Concerns a Proposed Equipment Purchase Assuming That Net Cash Flows Are Received Evenly Throughout the \quad

question 117

Multiple Choice

The following data concerns a proposed equipment purchase:
$\begin{array}{lr}\text{cost} & \quad & \$~ 58,000\\\text{Salvage value} & \quad & \$~ 3,000 \\\text{Estimated useful life} & \quad & 5~ \text{years}\\\text{Annual net cash flows} & \quad & \$ ~18,000\\ \text{Depreciation method} & \quad & \text{Straight-line}\\\end{array}$
Assuming that net cash flows are received evenly throughout the year,the accounting rate of return is:

• A) 24.13%
• B) 20.98%
• C) 22.95%
• D) 59.00%
• E) 25.45%

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