Suppose a Firm Invests $600 in a Project

question 301

Multiple Choice

Suppose a firm invests $600 in a project. The initial cost is depreciated straight-line to zero over 3 years. Net income from the project is $100, $125, and $140 in each of the three years of the project's life. What is the average accounting return?

• A) 18.25%
• B) 20.28%
• C) 35.49%
• D) 40.56%
• E) 60.83%

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Definitions:

Lien Creditor

A creditor who has a legal right or claim against a debtor's property as security for a debt or charge.

Partnership Distributions

The sharing out of profits, assets, or earnings among the partners of a partnership based on the agreed-upon terms.

Sole Proprietorship

A business structure where a single individual owns and operates the business, bearing all the business's financial responsibilities and obligations.

Legal Entity

An organization or structure that has legal rights and obligations, including the capability to enter into contracts, sue, and be sued.