A company is considering purchasing factory equipment that costs $500000 and is estimated to have no salvage value at the end of its 5-year useful life. If the equipment is purchased, annual revenues are expected to be $153000 and annual operating expenses exclusive of depreciation expense are expected to be $22000. The straight-line method of depreciation would be used. If the equipment is purchased, the annual rate of return expected on this equipment is O 12.40%. O 5.24%. O 30.60% O 26.20%.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Question

Subject: accounting 

 

 

A company is considering purchasing factory equipment that costs $500000 and is estimated to have no salvage value at the end of its
5-year useful life. If the equipment is purchased, annual revenues are expected to be $153000 and annual operating expenses
exclusive of depreciation expense are expected to be $22000. The straight-line method of depreciation would be used. If the
equipment is purchased, the annual rate of return expected on this equipment is
O 12.40%.
O 5.24%
O 30.60%
O 26.20%.
Transcribed Image Text:A company is considering purchasing factory equipment that costs $500000 and is estimated to have no salvage value at the end of its 5-year useful life. If the equipment is purchased, annual revenues are expected to be $153000 and annual operating expenses exclusive of depreciation expense are expected to be $22000. The straight-line method of depreciation would be used. If the equipment is purchased, the annual rate of return expected on this equipment is O 12.40%. O 5.24% O 30.60% O 26.20%.
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