Tam Co. is negotiating for the purchase of equipment that would cost $100,000, with the expectation that $20,000 per year could be saved in after-tax cash costs if the equipment were acquired. The equipment's estimated useful life is ten years, with no residual value, and it would be depreciated by the straight-line method. Tam's predetermined minimum desired rate of return is 12%. The present value of an annuity of 1 at 12% for ten periods is 5.65. The present value of 1 due in ten periods at 12% is .322. Accrual accounting rate of return based on the initial investment is

Tam Co. is negotiating for the purchase of equipment that would cost $100,000, with the expectation that $20,000 per year could be saved in after-tax cash costs if the equipment were acquired. The equipment's estimated useful life is ten years, with no residual value, and it would be depreciated by the straight-line method. Tam's predetermined minimum desired rate of return is 12%. The present value of an annuity of 1 at 12% for ten periods is 5.65. The present value of 1 due in ten periods at 12% is .322. Accrual accounting rate of return based on the initial investment is

Tam Co. is negotiating for the purchase of equipment that would cost $100,000, with the expectation that $20,000 per year could be saved in after-tax cash costs if the equipment were acquired. The equipment's estimated useful life is ten years, with no residual value, and it would be depreciated by the straight-line method. Tam's predetermined minimum desired rate of return is 12%. The present value of an annuity of 1 at 12% for ten periods is 5.65. The present value of 1 due in ten periods at 12% is .322. Accrual accounting rate of return based on the initial investment is




a. 30%
b. 20%
c. 12%
d. 10%


Answer: d.


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