Darth Company Is Considering the Purchase of New Heavy Construction

question 23

Multiple Choice

Darth Company is considering the purchase of new heavy construction equipment that will cost $2,000,000 and have a life of eight years with no expected salvage value. The expected cash flows associated with the project are as follows:
$\begin{array}{lll}&\text { Cash } & \text { Cash Expenses \& } \\\text { Year } &\text { Revenues }&\text { Depreciation }\\1 & \$ 2,400,000 & \$ 1,900,000 \\2 & \$ 2,400,000 & \$ 1,900,000 \\3 & \$ 2,400,000 & \$ 1,900,000 \\5 & \$ 2,400,000 & \$ 1,900,000 \\6 & \$ 2,400,000 & \$ 1,900,000 \\7 & \$ 2,400,000 & \$ 1,900,000 \\8 & \$ 2,400,000 & \$ 1,900,000 \\& \$ 2,400,000 & \$ 1,900,000\end{array}$
-Refer to the Figure.What is the accounting rate of return for the project?

• A)3.125%
• B)25.000%
• C)83.330%
• D)120.000%

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