A Project Produces Annual Net Income of $46,200,$51,800,and $62,900 Over

question 20

Multiple Choice

A project produces annual net income of $46,200,$51,800,and $62,900 over its 3-year life,respectively.The initial cost of the project is $675,000.This cost is depreciated straight-line to a zero book value over three years.What is the average accounting rate of return if the required discount rate is 14.5 percent?

• A)15.89 percent
• B)16.67 percent
• C)18.98 percent
• D)20.25 percent
• E)23.84 percent

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Definitions:

Merchandising Company

Businesses that buy finished goods and sell them at a profit without modifying the product, focusing on distribution rather than production.

Sales Revenue

The income generated from the sale of goods or services before any costs or expenses are deducted.

Relevant Range

The scope of operations within which the assumptions regarding the behavior of variable and fixed costs hold true.

Cost Formula

An equation used to calculate the total cost of production that combines both fixed costs and variable costs.