Question 30 Darth Company is considering the purchase of new heavy construction

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Question 30 Darth Company is considering the purchase of new heavy construction equipment that will cost $2,000,000 and have a life of 8 years with no expected salvage value. The expected cash flows associated with the project are as follows: Year Cash Revenues Cash Expenses & Depreciation 1 $2,400,000 $1,900,000 2 $2,400,000 $1,900,000 3 $2,400,000 $1,900,000 4 $2,400,000 $1,900,000 5 $2,400,000 $1,900,000 6 $2,400,000 $1,900,000 7 $2,400,000 $1,900,000 8 $2,400,000 $1,900,000 What is the accounting rate of return for the project? Answer 25% 3.125% 400% 3.33% 20%

Explanation / Answer

25%

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