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

question 34

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%.

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Definitions:

Vectors

Quantities that have both magnitude and direction, represented by arrows in physics and mathematics.

Magnitude

Refers to the size or extent of something, often used in the context of numbers, earthquakes, and vectors to denote their strength or value.

Hypotenuse

The longest side of a right-angled triangle, opposite the right angle, calculated with the Pythagorean theorem.

Inches

A unit of length in the British imperial and United States customary systems of measurement, equal to 1/12 of a foot.