Buster Evans Is Considering Investing $20,000 in a Project with the Following

question 158

Multiple Choice

Buster Evans is considering investing $20,000 in a project with the following annual cash revenues and expenses: Depreciation will be $4,000 per year.
What is the accounting rate of return on the investment?

• A)15%
• B)35%
• C)70%
• D)75%
• E)none of these

---

Definitions:

Production Function

A mathematical equation that describes the maximum amount of output a firm can produce with a given set of inputs.

Output Levels

Refers to the specific quantities of products or services generated by a business, sector, or economy during a specified period.

Returns to Scale

The rate at which output increases in response to proportional increases in all inputs.

Production Function

An equation or graph that shows the output generated from different combinations of inputs, usually focusing on labor and capital.