An Investment of $4,000 Provides an Average Net Cash Flow

question 54

Multiple Choice

An investment of $4,000 provides an average net cash flow of $960 with zero salvage value. Depreciation is $80 per year. What is the accounting rate of return using the original investment?

• A) 20%
• B) 22%
• C) 24%
• D) 40%

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Definitions:

Discount Rate

The interest rate charged by central banks on loans to commercial banks, influencing monetary policy and the cost of borrowing.

Employee Benefit

An employee benefit is a form of compensation provided to employees in addition to their regular salaries or wages, including health insurance, retirement plans, and paid time off.

Discount Rate

This rate is essential in discounted cash flow analysis for calculating the present value of future cash flows.

Present Value

The immediate financial worth of an expected future sum of money or cash flows, discounted with a predetermined rate of return.