Rodriguez Inc

question 68

Multiple Choice

Rodriguez Inc.is considering a project that costs $200,000.The company expects the annual cash revenues to be $75,000 and annual expenses (including depreciation) to be $30,000.The project has a ten-year useful life and a residual value of $25,000.Assume Rodriguez Inc.uses the straight-line method of depreciation.
-Using the above information for Rodriguez,the accounting rate of return for the project is
(Round your answer to a whole percent)

• A)51 percent.
• B)22 percent.
• C)67 percent.
• D)40 percent.

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Definitions:

Deferred Tax Liability

A tax obligation that arises from temporary differences between the accounting and tax treatment of assets and liabilities which is expected to be settled in the future.

Shareholders' Equity

The residual interest in the assets of a corporation after deducting its liabilities, also known as stockholders' equity or owner's equity.

Recoverable Amount

The higher value between an asset's fair value less costs to sell and its value in use.

Deferred Tax Liability

A tax obligation that a company has incurred but is not yet required to pay, often arising from differences between accounting methods for financial statements and tax purposes.