Prescott Corporation is considering an investment in new equipment costing $912,000. The equipment will be depreciated on a straight-line basis over a ten-year life and is expected to have a residual value of $92,000. The equipment is expected to generate net cash inflows of $140,000 for each of the first five years and $100,000 for each of the last five years. What is the accounting rate of return associated with the equipment investment? (Round your answer to two decimal places.) OA. 8.59% B. 8.66% OC. 8.99% OD. 7.57%
Prescott Corporation is considering an investment in new equipment costing $912,000. The equipment will be depreciated on a straight-line basis over a ten-year life and is expected to have a residual value of $92,000. The equipment is expected to generate net cash inflows of $140,000 for each of the first five years and $100,000 for each of the last five years. What is the accounting rate of return associated with the equipment investment? (Round your answer to two decimal places.) OA. 8.59% B. 8.66% OC. 8.99% OD. 7.57%
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 10E: Roberts Company is considering an investment in equipment that is capable of producing more...
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![Prescott Corporation is considering an investment in new equipment costing $912,000. The equipment will be depreciated on a
straight-line basis over a ten-year life and is expected to have a residual value of $92,000. The equipment is expected to generate net
cash inflows of $140,000 for each of the first five years and $100,000 for each of the last five years. What is the accounting rate of return
associated with the equipment investment? (Round your answer to two decimal places.)
OA. 8.59%
OB. 8.66%
OC. 8.99%
OD. 7.57%
C](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F264c8d26-bec6-4d7b-8ae9-5722f54632ea%2Fbce0544e-f9ad-42b8-b27d-11e4f5f0c394%2F1f4wyw_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Prescott Corporation is considering an investment in new equipment costing $912,000. The equipment will be depreciated on a
straight-line basis over a ten-year life and is expected to have a residual value of $92,000. The equipment is expected to generate net
cash inflows of $140,000 for each of the first five years and $100,000 for each of the last five years. What is the accounting rate of return
associated with the equipment investment? (Round your answer to two decimal places.)
OA. 8.59%
OB. 8.66%
OC. 8.99%
OD. 7.57%
C
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