Question
1. The average accounting rate of return: -Is actually based more on financial values than on accounting values. -Measures net income against the market value
1. The average accounting rate of return:
-Is actually based more on financial values than on accounting values.
-Measures net income against the market value of a firm.
-Is similar to the return on assets ratio.
-Is the primary methodology used in analyzing independent projects.
-Is highly recommended by financial professionals as one of the two best methodologies used in the analysis of independent projects.
2. Gas Products International uses machines to compress medical gasses for hospitals, care homes, and other health care services providers. One of the machines that the company uses costs $142,000 and lasts about 5 years before it needs to be replaced. The operating cost per machine is $7,000 a year. What is the equivalent annual cost of one machine if the required rate of return is 11%? (Round your answer to whole dollars)
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