Aqua Shop Is Considering the Purchase of a Used Printing

question 67

Multiple Choice

Aqua Shop is considering the purchase of a used printing press costing $15,000.The printing press would generate a net cash inflow of $6,000 per year for four years.At the end of four years, the press would have no salvage value.The company's cost of capital is 12%.The company uses straight-line depreciation with no mid-year convention.
What is the accounting rate of return on the original investment in the press to the nearest percent, assuming no taxes are paid?

• A) 20 %
• B) 15%
• C) 41%
• D) 9%

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Definitions:

Marginal Cost Function

A mathematical representation that describes how the cost of producing one additional unit of a good varies as the quantity of production changes.

Market Short-Run Supply

The total quantity of a good or service that producers are willing and able to sell at current prices in the short run, considering fixed and variable costs.

Units of Output

The individual items or quantities produced by a process or system.

Short-Run Elasticity

The responsiveness of the quantity demanded or supplied of a good to a change in its price over a short period.