The Drive-Thru Requires an Average Accounting Return (AAR) of at Least

question 49

Multiple Choice

The Drive-Thru requires an average accounting return (AAR) of at least 17 percent on all fixed asset purchases. Currently, it is considering some new equipment costing $168,000. This equipment will have a 4-year life over which time it will be depreciated on a straight line basis to a zero book value. The annual net income from this equipment is estimated at $8,100, $10,300, $17,900, and $19,600 for the four years. Should this purchase occur based on the accounting rate of return? Why or why not?

• A) Yes; because the AAR is less than 17 percent
• B) Yes; because the AAR is equal to 17 percent
• C) Yes; because the AAR is greater than 17 percent
• D) No; because the AAR is less than 17 percent
• E) No; because the AAR is greater than 17 percent

---

Definitions:

Polygraph

A lie detector test that measures and records several physiological indicators such as blood pressure, pulse, respiration, and skin conductivity while the subject is asked and answers a series of questions.

fMRI

Functional Magnetic Resonance Imaging, a non-invasive neuroimaging technique that measures brain activity by detecting changes associated with blood flow.

PET Scan

A diagnostic imaging test using a radioactive substance to visualize and measure metabolic processes in the body.

Brain Activity

The various physiological and biochemical processes that occur within the brain to support thought, perception, and behavior.