Darth Company
Darth Company Is Considering the Purchase of New

question 127

Multiple Choice

Darth Company
Darth Company is considering the purchase of new heavy construction equipment that will cost $2,000,000 and have a life of eight years with no expected salvage value. The expected cash flows associated with the project are as follows: $\begin{array}{lcc}&\text { Cash } & \text {Cash Expenses \& }\\\text { Year } & \text { Revenues } & \text { Depreciation } \\1 & \$ 2,400,000 & \$ 1,900,000 \\2 & \$ 2,400,000 & \$ 1,900,000 \\3 & \$ 2,400,000 & \$ 1,900,000 \\4 & \$ 2,400,000 & \$ 1,900,000 \\5 & \$ 2,400,000 & \$ 1,900,000 \\6 & \$ 2,400,000 & \$ 1,900,000 \\7 & \$ 2,400,000 & \$ 1,900,000 \\8 & \$ 2,400,000 & \$ 1,900,000\end{array}$
-Refer to Darth Company. What is the accounting rate of return for the project?

• A) 3.125%
• B) 25.000%
• C) 83.330%
• D) 120.000%