Suppose the Initial Capital Cost of a New Piece of Equipment

question 19

Multiple Choice

Suppose the initial capital cost of a new piece of equipment was $250,000 and the old piece of equipment was sold at a salvage value of $20,000.If the net initial outlay was -$235,000,then the depreciated value of the old asset must have been ______ the salvage value.

• A)greater than
• B)less than
• C)equal to
• D)either greater than or less than

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Definitions:

Return On Investment

A measure used to evaluate the profitability of an investment, calculated as a ratio of net profit to the initial cost of the investment.

Invested Assets

Assets that are purchased or acquired for the purpose of generating income or appreciating in value, such as stocks, bonds, and real estate.

Net Income

The total earnings of a company after subtracting all expenses, taxes, and losses from total revenue, indicating the firm's profitability over a specific period.

Investment Turnover

A measure of the efficiency with which a company or portfolio generates revenue from its investments, calculated as sales divided by average invested assets.