Larry's Lanterns Is Considering a Project Which Will Produce Sales

question 75

Multiple Choice

Larry's Lanterns is considering a project which will produce sales of $250,000 a year for the next five years.The profit margin is estimated at 5%.The project will cost $300,000 and be depreciated straight-line to a book value of zero over the life of the project.Larry's has a required accounting return of 8%.This project should be _____ because the AAR is ____.

• A)rejected; 4.14%
• B)rejected; 6%
• C)rejected; 8.33%
• D)accepted; 8.33%
• E)accepted; 9.93%

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