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The Crystal Company uses straightline depreciation and is considering a capital expenditure for which the following relevant cash flow data have been estimated: Estimated useful

The Crystal Company uses straightline depreciation and is considering a capital expenditure for which the following relevant cash flow data have been estimated:

Estimated useful life:

3 years

Initial investment:

$400,000

Savings year 1:

$160,000

Savings year 2:

$150,000

Savings year 3:

$90,000

Residual value after 3 yrs

$30,000

The accounting rate of return is closest to

A.

0.53%.

B.

37.50%.

C.

2.50%.

D.

15.00%.

Please show work! Thank You!

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