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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