Question: Danny Bostic is evaluating a new ticketing system for his theater. The system will cost $275,000 and will save the theater $57,800 in annual cash

Danny Bostic is evaluating a new ticketing system for his theater. The system will cost $275,000 and will save the theater $57,800 in annual cash operating costs. Danny expects the new system to last ten years, at which time the system will have a salvage value of $15,000. If Danny purchases the new system, he will be able to sell his existing system for $10,000.

Required

a. Calculate the accounting rate of return for the proposed ticketing system.

b. Danny Bostic 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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