Use the Information Below to Answer the Following Question(s)

question 170

Multiple Choice

Use the information below to answer the following question(s) .
Boyle Company is evaluating two possible investments in depreciable plant assets. The company uses the straight-line method of depreciation. The following information is available:

-Suppose Barnes & Noble Booksellers is considering investing in warehouse-management software that costs $500,000, has $50,000 residual value and should lead to cash cost savings of $120,000 per year for its five-year life. In calculating the ARR, which of the following figures should be used as the equation's denominator?

• A) $225,000
• B) $500,000
• C) $250,000
• D) $275,000

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