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TJ Company purchased a new piece of equipment that is expected to generate cash inflows...

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Accounting

TJ Company purchased a new piece of equipment that is expected to generate cash inflows of $25,000 for each year of its 10-year life. The equipment has a $20,000 expected salvage value at the end of its 10-year life. TJ Company was able to sell old equipment at the time of purchasing the new equipment for $18,125. The accounting rate of return on the new equipment was 16%.

Calculate the initial cost of the new equipment.

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