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Question Help Dartis Company is considering investing in a specialized equipment costing $690,000. The equipment has a useful
Uamma Company is considering an investment of $500,000 in a land development project. It will yield cash flows of $20,000 for
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Answer #1

Part 1)

The correct answer is

D) 3.11 %

Calculation

Accounting Rate of Return = (average net income / average asset )

= ((680000-(690000-69000))/5) / ((690000+69000)/2)

= 11800/379500

= 3.11 %

Part 2)

The correct answer is

$ 285780

Calculation

Net present value = (annual cash flow * present value annuity (9%,5)) - cash outflow

= ( 202000*3.89) - 500000

= $ 285780

The correct answer is B) $ 285780

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