Bill Joyner is evaluating a new ticketing system for his theater. The system will cost $225,000 and
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Bill Joyner is evaluating a new ticketing system for his theater. The system will cost $225,000 and will save the theater $57,275 in annual cash operating costs. Bill expects the new system to last eight years, at which time the system will have a salvage value of $20,000. If Bill purchases the new system, he will be able to sell his existing system for $14,000.
Required
a. Calculate the accounting rate of return for the proposed ticketing system.
b. Bill Joyner wants to earn a minimum accounting rate of return of 10% on his projects.
Should he invest in the new equipment? Why or why not?
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
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a 25625 depreciation per year Incremental income 57275 2...View the full answer
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