You're Trying to Determine Whether or Not to Expand Your

question 58

Multiple Choice

You're trying to determine whether or not to expand your business by building a new manufacturing plant.The plant has an installation cost of $29 million, which will be depreciated straight-line to zero over its three-year life.If the plant has projected net income of $1,848,000, $2,080,000, and $2,720,000 over these three years, what is the project's average accounting return (AAR) ?

• A)14.69 percent
• B)14.14 percent
• C)15.03 percent
• D)15.28 percent
• E)14.21 percent