A Project Has an Initial Cost of $35,000 and a 3-Year

question 81

Multiple Choice

A project has an initial cost of $35,000 and a 3-year life. The company uses straight-line depreciation to a book value of zero over the life of the project. The projected net income from the project is $1,200, $2,300, and $1,800 a year for the next 3 years, respectively. What is the average accounting return?

• A)8.72 percent
• B)10.10 percent
• C)11.26 percent
• D)14.69 percent
• E)15.14 percent

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Definitions:

Real Cost

The total cost of manufacturing or providing a service, including all direct and indirect costs.

Marginal Cost

The cost of producing an additional unit of a product, highlighting the concept of increment in total cost with an increase in production.

Tuition

The fee that educational institutions charge for instruction.

Books

Physical or electronic publications consisting of written, printed, or illustrated work bound together for reading or study.