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The Hanna Company uses straightminusline depreciation and is considering a capital expenditure for which the following relevant cash flow data have been estimated: Estimated useful
The Hanna Company uses
straightminusline
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: | $500,000 |
| Savings year 1: | $210,000 |
| Savings year 2: | $150,000 |
| Savings year 3: | $225,000 |
| Residual value after 3 yrs | $50,000 |
The accounting rate of return is closest to
A.
39.00%.
B.
7.69%.
C.
30.00%.
D.
9.00%.
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