Buckhead Shop Is Considering the Purchase of a Used Printing

question 152

Multiple Choice

Buckhead Shop is considering the purchase of a used printing press costing $19,200.The printing press would generate a net cash inflow of $8,000 per year for five years.At the end of three years,the press would have no salvage value.The company's cost of capital is 10%.The company uses straight-line depreciation with no mid-year convention. Assume no taxes are paid.What would be the accounting rate of return on the original investment in the press to the nearest percent?

• A)8.33%
• B)10.00%
• C)21.67%
• D)75.00%

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Definitions:

Liquidation

The process of converting company assets into cash to pay off debts, often preceding the dissolution of the company.

Trustee

A person or firm that holds and administers property or assets for the benefit of a third party.

Assets

Resources owned by a company or individual with economic value.

Bankruptcy Law

The area of law dealing with situations where individuals or entities cannot repay their debts and seek relief through legal proceedings.