Desiree, Inc

question 320

Multiple Choice

Desiree, Inc. is considering adding a new product with a start-up cost of $540,000. This cost will be depreciated over 3 years, which is the estimated life of the product. Desiree has a 34% marginal tax
Rate. The net income for each of the three years is estimated at $15,000, $45,000, and $80,000.
What is the average accounting return for the new product?

• A) 8.64%
• B) 11.30%
• C) 17.28%
• D) 21.00%
• E) 25.93%