An Investment Has an Initial Cost of $320,000 and a Life

question 48

Multiple Choice

An investment has an initial cost of $320,000 and a life of four years. This investment will be depreciated by $60,000 a year and will generate the net income shown below. Should this project be accepted based on the average accounting rate of return (AAR) if the required rate is 9 percent? Why or why not?

• A) Yes; because the AAR less than 9 percent
• B) Yes; because the AAR is 9 percent
• C) Yes; because the AAR is greater than 9 percent
• D) No; because the AAR is 9 percent
• E) No; because the AAR is greater than 9 percent

---

Definitions:

European American

A term used to describe Americans who have origins in any of the original peoples of Europe.

Ethnicity

A social group that shares common and distinctive culture, religion, language, or heritage.

Latino

A term commonly used in the United States to refer to people of Latin American origin or descent, it is often used interchangeably with "Hispanic" though there are distinctions in some contexts.

Catholic

Pertaining to the universal Christian church or its beliefs, practices, and traditions rooted in the teachings of the Roman Catholic Church.