A Project Has an Initial Cost of $61,000 and a 5-Year

question 176

Multiple Choice

A project has an initial cost of $61,000 and a 5-year life. The company uses straight-line depreciation to a zero book value over the life of the project. The projected net income from the project is $1,500, $1,600, $1,900, $2,100, and $2,200 a year for the next five years, respectively. What is the average accounting rate of return?

• A) 6.10 %
• B) 7.62 %
• C) 7.97 %
• D) 8.48 %
• E) 9.42 %

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Definitions:

Cognitive Dissonance

The mental discomfort or stress experienced by an individual who holds two or more contradictory beliefs, ideas, or values at the same time.

Justification of Effort

A concept in social psychology suggesting that individuals assign greater value to outcomes they have put effort into achieving.

Mere Exposure Effect

A psychological phenomenon in which people tend to develop a preference for things merely because they are familiar with them.

Cognitive Dissonance

The psychological unrest felt by an individual who simultaneously maintains two or more conflicting beliefs, ideas, or values.