An Investment Has an Initial Cost of $462,000 and Will

question 40

Multiple Choice

An investment has an initial cost of $462,000 and will generate the net income amounts shown below.This investment will be depreciated straight-line to zero over the four-year life of the project.Should this project be accepted based on the average accounting rate of return if the required rate is 14.75 percent? Why or why not?

• A)Yes, because the AAR is equal to 14.75 percent
• B)Yes, because the AAR is greater than 14.75 percent
• C)Yes, because the AAR is less than 14.75 percent
• D)No, because the AAR is greater than 14.75 percent
• E)No, because the AAR is less than 14.75 percent

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Definitions:

Patents and Licenses

Legal mechanisms that grant inventors exclusive rights to their inventions, and permissions required to engage in certain activities or businesses.

Barrier to Entry

Economic, procedural, regulatory, or technological conditions that obstruct or restrict new competitors from easily entering an industry or area of business.

Near Monopolies

Near monopolies refer to markets where one or a few companies dominate, significantly limiting competition.

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