Fargo Corp. is considering the purchase of a new plece of equipment The equipment costs $51,400 and will have a salvage value of $6,400 after nine years. Using the new piece of equipment will increase Fargo's annual cash flows by $7,400. Fargo has a hurdle rate of 13%. a. How much is Fargo's annual depreciation on the equipment? redason b. What is Fargo's projected annual increase in net income? Net Income c. What is the accounting rate of return for purchasing the new plece of equipment? (Round your answer to 2 decimal plac.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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.What is Fargo's projected annual increase in net income?
What is the accounting rarte of return for purchasing the new piece of equipment? (Round your answer to 2 decimal places.)
ahe of henturm
d. Based on financial factors, should Fargo purchase the new equipment?
O Yes
ONo
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Transcribed Image Text:.What is Fargo's projected annual increase in net income? What is the accounting rarte of return for purchasing the new piece of equipment? (Round your answer to 2 decimal places.) ahe of henturm d. Based on financial factors, should Fargo purchase the new equipment? O Yes ONo Next
Fargo Cop, is considering the purchase of a new piece of equipment. The equipment costs $51,400 and will have a salvage value of
$6,400 after nine years. Using the new piece of equipment will increase Fargo's annual cash flows by $7,400. Fargo has a hurdle rate
of 13%.
a. How much is Fargo's annual depreciation on the equipment?
DepreciaSon
b. What is Fargo's projected annual increase in net income?
Net Income
c. What is the accounting rate of return for purchasing the new plece of equipment? (Round your answer to 2 decimal places.)
Rate of Retum
Transcribed Image Text:Fargo Cop, is considering the purchase of a new piece of equipment. The equipment costs $51,400 and will have a salvage value of $6,400 after nine years. Using the new piece of equipment will increase Fargo's annual cash flows by $7,400. Fargo has a hurdle rate of 13%. a. How much is Fargo's annual depreciation on the equipment? DepreciaSon b. What is Fargo's projected annual increase in net income? Net Income c. What is the accounting rate of return for purchasing the new plece of equipment? (Round your answer to 2 decimal places.) Rate of Retum
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