Why Might the Accounting Rate of Return Be Low in the Initial

question 54

Multiple Choice

Why might the accounting rate of return be low in the initial years of an investment?

• A)Because the depreciation tax shield is negative
• B)Because customers are not willing to spend money in the initial years
• C)Because the investment base will be higher in the initial years
• D)Because the company must pay for the investment at the beginning of the first year

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Definitions:

Alcoa Case

A landmark antitrust case in which the Aluminum Company of America (Alcoa) was found to have monopolized the production and sale of aluminum, violating the Sherman Act.

Federal Trade Commission

A federal agency established to prevent fraudulent, deceptive, and unfair business practices in the marketplace.

Unfair Practices

Activities or behaviors that are deceptive, unjust, or violate standards of conduct or fairness in business, often subject to legal penalties.

Interlocking Directorates

Occurs when members of a company's board of directors also serve on the boards of one or more other companies, potentially leading to conflicts of interest.