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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