Desiree, Inc

question 354

Multiple Choice

Desiree, Inc. is considering adding a new product with a start-up cost of $540,000. This cost will be depreciated over 3 years, which is the estimated life of the product. Desiree has a 34% marginal tax rate. The net income for each of the three years is estimated at $15,000, $45,000, and $80,000. What is the average accounting return for the new product?

• A) 8.64%
• B) 11.30%
• C) 17.28%
• D) 21.00%
• E) 25.93%

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Definitions:

Development Costs

Expenses incurred in the creation, design, and implementation of new products, projects, or services, including research and development.

Net Benefits

The total positive effects or gains of a decision or action minus the total costs or negatives associated with it.

Effect Size

A quantitative measure describing the strength of a relationship between two variables.

Standard Deviation

A statistical measure that quantifies the amount of variation or dispersion of a set of data values from the mean or average.