An Investment Has an Initial Cost of $3

question 59

Multiple Choice

An investment has an initial cost of $3.2 million. This investment will be depreciated by $900,000 a year over the 3-year life of the project. Should this project be accepted based on the average accounting rate of return if the required rate is 10.5 percent? Why or why not?

• A) Yes; because the AAR is 10.5 percent
• B) Yes; because the AAR is less than 10.5 percent
• C) Yes; because the AAR is greater than 10.5 percent
• D) No; because the AAR is greater than 10.5 percent
• E) No; because the AAR is less than 10.5 percent

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Definitions:

Production

Is the human capacity to make and use tools. It improves our ability to take what we want from nature.

Abstraction

The human capacity to create general ideas, or ways of thinking that are not linked to particular instances. For example, languages, mathematical notations, and signs allow us to classify experience and generalize from it.

Cooperation

The process of working together towards a common goal or benefit, often requiring compromise and collective effort.

Conflict

A situation or process in which individuals, groups, or entities have opposing ideas, interests, or objectives resulting in tension or struggle.