A Project Has Average Net Income of $5,900 a Year

question 76

Multiple Choice

A project has average net income of $5,900 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; 12.04
• D)reject; 5.71
• E)reject; 12.04