Burn Incorporated purchased a $590, 000 machine to manufacture a specialty tap for electrical equipment. The tap is in high demand and Burn can sell all that it could manufacture for the next 10 years. To encourage capital investments, the government exempts taxes on profits from new investments in this type of machinery. This legislation most likely will remain in effect in the foreseeable future. The equipment is expected to have 10 years of useful life and no salvage value at the end of this 10-year period. The firm uses straight-line depreciation. The net cash inflow is expected to be $138,000 each year. Burn uses a discount rate of 14% in evaluating its capital investments. The estimated accounting (book) rate of return (to two decimal places) based on average investment for this proposed investment is: Multiple Choice 11.51 %. 12.78 %. 24.23 %. 26.78%. 49.68 %.

Burn Incorporated purchased a $590, 000 machine to manufacture a specialty tap for electrical equipment. The tap is in high demand and Burn can sell all that it could manufacture for the next 10 years. To encourage capital investments, the government exempts taxes on profits from new investments in this type of machinery. This legislation most likely will remain in effect in the foreseeable future. The equipment is expected to have 10 years of useful life and no salvage value at the end of this 10-year period. The firm uses straight-line depreciation. The net cash inflow is expected to be $138,000 each year. Burn uses a discount rate of 14% in evaluating its capital investments. The estimated accounting (book) rate of return (to two decimal places) based on average investment for this proposed investment is: Multiple Choice 11.51 %. 12.78 %. 24.23 %. 26.78%. 49.68 %.

Name: Burn Incorporated purchased a $590, 000 machine to manufacture a spec
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Description: Burn Incorporated purchased a $590, 000 machine to manufacture a specialty tap for electrical equipment. The tap is in high demand and Burn can sell all that it could manufacture for the next 10 years. To encourage capitalinvestments, the government

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Burn Incorporated purchased a $600,000 machine to manufacture a specialty tap for electrical equipment. The tap is in high demand and Burn can sell all that it could manufacture for the next 10 years. To encourage capital investments, the government exempts taxes on profits from new investments in this type of machinery. This legislation most likely will remain in effect in the foreseeable future. The equipment is expected to have 10 years of useful life and no salvage value at the end of this 10-year period. The firm uses straight-line depreciation. The net cash inflow is expected to be $146,000 each year. Burn uses a discount rate of 11% in evaluating its capital investments. The estimated accounting (book) rate of return (to two decimal places) based on average investment for this proposed investment is: Multiple Choice 13.40%. 14.67%. 26.12%. 28.67%. 51.57%.
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