A Project That Provides Annual Cash Flows of $12,600 for 12

question 16

Multiple Choice

A project that provides annual cash flows of $12,600 for 12 years costs $65,000 today.At what rate would you be indifferent between accepting the project and rejecting it?

• A)15.28 percent
• B)15.40 percent
• C)15.51 percent
• D)16.18 percent
• E)16.74 percent

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Definitions:

Double-Declining-Balance

A method of accelerated depreciation which doubles the rate at which an asset depreciates compared to the straight-line depreciation method.

Depreciation

The allocation of the cost of a tangible asset over its useful life, reflecting the decrease in value over time due to usage, wear and tear, or obsolescence.

Accumulated Depreciation

The total depreciation amount that has been charged against a fixed asset's cost over its useful life to reflect wear and tear.

Equipment

Tangible property owned by a business used in operations, such as machinery, vehicles, or computers.