Question

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?



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  • CreatedFebruary 21, 2014
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