Calculate the expected accounting rate of return on average investment for a proposed investment of $9.000,000 in a fuedasset, using straight line depreciation with a useful life of 20 years, $600,000 residual value, and is expected to increase thecompany's total net income (after depreciation and taxes) over the investment's 20-year useful life by $12,000,00.O 12.5%O 250.0%O 18.0%O 14.3%O 6.7%

Accounting Rate of Return: The formula for the accounting rate of return helps in determining the…

Answered: Calculate the expected accounting rate…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Choose the appropriate definition for each term. Term Long-lived assets Capitalization of cost Units-of-production method Definition Assets that will be used for more than a year. How expenses are reported in the income statement. A depreciation method that produces higher amounts of depreciation expense in the early years of an asset's life and lower amounts in the later years. Carrying value Asset impairment loss Depreciation
When calculating depreciation expense using the straight line method, useful life is expressed as time dollars Units expected to be produced salvage value Next *
[The following information applies to the questions displayed below.] Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $83,600. The machine's useful life is estimated at 20 years, or 398,000 units of product, with a $4,000 salvage value. During its second year, the machine produces 33,800 units of product.
Which of the following statements is the assumption on which straight line depreciation is based? Service value declines as a function of time rather than use Physical wear and tear are more important than economic obsolescence Service value declines as function of obsolescence rather than time The operating efficiency of the asset decrease in later years
Improvement of the production line resulting in an increase in productivity, $32,100 would be an expense in the period occured or would be capitalized and depreciated over the useful life of the asset?
Which depreciation method will compute the most depreciation expense over the life of the asset? O Declining-balance will produce the most depreciation expense. O Units-of-production will produce the most depreciation expense. O All methods will produce equal depreciation expense over the life of the asset. O Straight-line will produce the most depreciation expense
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T/F: Depreciation is the process of allocating the cost of a long-term asset over its useful life.
Which of the following best describes an accelerated depreciation method? A. A method by which an equal amount of expense is assigned for every full year of use. B. A method by which depreciation is based on the level of actual usage rather than the passage of time. C. A method of determining depreciation which assigns larger expenses to the initial years of an asset’s service and smaller expenses to the later years. D. A method of allocating the cost of a wasting asset to expense over the periods during which the value is removed from the property.
In a written down value method, the amount of depreciation _________________. a. Increases year after year b. Will be the same as book value c. Reduces year after year d. Remains the same for all the years
Initial Outlay = Cost of Asset + Installation charges + Opportunity costs of any Existing asset + any working capital required – proceeds from selling an existing asset Tax Effects The above formula was given by our tutor to calculate this. How would you treat the costs using this formaula?
A long-term asset that is retired from operations and held for disposal or sale is valued at ________. Group of answer choices value in use replacement cost lower of cost or market lower of carrying value or net realizable value

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Calculate the expected accounting rate of return on averag asset, using straight line depreciation with a useful life of2