Question
Alfred's requires discount rate of at least 14.5 percent on all fixed asset purchases. Currently, it is considering some new equipment costing $15,100. This equipment
Alfred's requires discount rate of at least 14.5 percent on all fixed asset purchases. Currently, it is considering some new equipment costing $15,100. This equipment will have a 5-year life and the annual cash flows from this equipment are estimated to be $6,700, $9,500, $11,900 $3,400 and $1,600. Should this purchase occur based on the accounting rate of return (ARR)? Why or why not? A. yes; because the ARR is less than 19 percent B. yes; because the ARR is equal to 19 percent C. yes; because the ARR is greater than 19 percent D. no; because the ARR is less than 19 percent E. no; because the ARR is greater than 19 percent
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