A Project Has Average Net Income of £2,100 a Year

question 8

Multiple Choice

A project has average net income of £2,100 a year over its 4-year life.The initial cost of the project is £65,000 which will be depreciated using straight-line depreciation to a book value of zero over
The life of the project.The firm wants to earn a minimal average accounting return of 8.5%.The firm
Should _____ the project based on the AAR of _____.

• A)accept; 6.46%
• B)accept; 9.69%
• C)accept; 12.92%
• D)reject; 6.46%
• E)reject; 12.92%

---

Definitions:

Discontinuous Innovations

Innovations that create a significant change in consumer behavior or revolutionize the way a market functions, often by introducing a completely new product or service.

Continuous Innovations

Ongoing, incremental improvements and updates to products or services, intended to maintain competitiveness and address evolving customer needs.

Test Market

A geographic region or demographic group used to gauge the viability of a product or service in a larger market by analyzing consumer response before a full-scale launch.

New-Product Development Process

The seven stages an organization goes through to identify opportunities and convert them into salable products or services.