A Project Has an Initial Cost of $61,000 and a 5-Year

question 271

Multiple Choice

A project has an initial cost of $61,000 and a 5-year life. The company uses straight-line depreciation to a zero book value over the life of the project. The projected net income from the
Project is $1,500, $1,600, $1,900, $2,100, and $2,200 a year for the next five years, respectively.
What is the average accounting rate of return?

• A) 6.10 percent
• B) 7.62 percent
• C) 7.97 percent
• D) 8.48 percent
• E) 9.42 percent

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Definitions:

Labor Market

The supply and demand for labor, where employers find employees and individuals find jobs.

Compensating Differentials

Variation in wages that arises to offset the desirability or undesirability of a job or the costs and benefits of working in different locations.

Less Pleasant

A subjective assessment indicating that something is not as enjoyable or agreeable as other options or experiences.

Compensating Differentials

Wage differences across jobs that reflect the desirable or undesirable aspects of different jobs, aiming to compensate workers for job attributes like risk or undesirable hours.