Assume a Project Has an Initial Cost of $48,000 and Will

question 64

Multiple Choice

Assume a project has an initial cost of $48,000 and will produce net income for 5 years.The project will use straight-line depreciation over the life of the project.The AAR of this project can be computed as

• A)(Sum of all net income / 5)/ ($48,000 / 2)
• B)(Sum of all net income / 2)/ ($48,000 / 2)
• C)($48,000 / 5)/ (Sum of all net income / 5)
• D)($48,000 / 2)/ (Sum of all net income / 2)
• E)(Sum of all net income / 5)/ $48,000

---

Definitions:

Purchase Of Equipment

The acquisition of equipment that a business requires for its operations, treated as a capital expenditure.

Investing Activities

Transactions and events that involve the purchase and sale of long-term assets and other investments, not directly related to the entity's normal line of business.

Long-Term Note

A debt security that matures in more than one year, requiring the borrower to repay the principal and interest over an extended period.

Financing Activities

Transactions and events that affect the long-term liabilities and equity of an organization, such as issuing stocks or bonds, and repaying bank loans.