A Project Has Average Net Income of $5,600 a Year

question 57

Multiple Choice

A project has average net income of $5,600 a year over its 6-year life. The initial cost of the project is $98,000 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 minimum average accounting return of 11.5 percent. The firm should _____ the project because the AAR is _____ percent.

• A)accept; 5.71
• B)accept; 9.90
• C)accept; 11.43
• D)reject; 5.71
• E)reject; 11.43

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Definitions:

Autism Spectrum Disorder

A developmental disorder that affects communication and behavior, characterized by difficulties in social interaction, communication challenges, and a pattern of repetitive behaviors or interests.

Echolalia

A symptom of autism or schizophrenia in which a person responds to statements by repeating the other person’s words.

Intellectual Disability

A disability characterized by significant limitations in both intellectual functioning and in adaptive behavior, which covers many everyday social and practical skills.

Socioeconomic Groups

Categories of people sharing similar levels of economic, occupational, and educational status.