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…

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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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The formula for straight-line depreciation is O service life/(cost + residual value). O cost/service life. O(cost + residual value)/service life. O(cost - residual value)/service life.
The depreciation method which uses a depreciation rate that is a multiple of the straight-line rate is called: Multiple Choice Units-of-production depreciation. Modified accelerated cost recovery system (MACRS) depreciation. Declining-balance depreciation. Book value depreciation. Amortization.
For the composite method, the composite a. rate is the total cost divided by the total annual depreciation. b. rate is the total annual depreciation divided by the total depreciable cost. c. life is the total cost divided by the total annual depreciation. d. life is the total depreciable cost divided by the total annual depreciation.
Which depreciation method would result in the same depreciation expense amount regardless of the partial period cor Select one: a. Sum-of-the-years'-digits b. Declining-balance c. Units-of-production d. Straight-line
Which of the following is true? O The book value at the end of an asset's useful life will be the same under all the depreciation methods allowed under generally accepted accounting principles. The annual depreciation expense will usually differ under the various depreciation methods. The total depreciation in the accumulated depreciation account will be the same at the end of the asset's useful life under all the methods allowed under generally accepted accounting principles. O All are true.
When determining the value for vacant land, we look to the following data points for financial calculations, EXCEPT: (A) Perc Test for Contaminants (B) Soft Costs (C) Profit Rates of Return (D) Hard Costs
In which method of depreciation, equal amount of depreciation is charged on the asset over its useful life O a. Written Down Value Method O b. Straight Line Method C. Sinking Fund Method d Annuity Method
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
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
Dividing accumulated depreciation by annual straight - line depreciation expense is best interpreted as an estimate of the: a) average life of a firm's assets. b) remaining life of a firm's assets. c) average age of a firm's assets.
give a long explanation on fractional depreciation?
T/F: Depreciation is the process of allocating the cost of a long-term asset over its useful life.

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