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

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Definitions:

Ratio

A quantitative relationship between two numbers showing how many times the first number contains the second or is contained by it.

Intermittent Reinforcement

A conditioning schedule in which a response is only sometimes rewarded, leading to more resistant behavioral patterns.

Reinforcer

In the context of behavioral psychology, a stimulus that follows a behavior and increases the likelihood of the behavior being repeated.

Desired Behavior

Refers to the specific actions or reactions an individual or organization aims to elicit from others through various strategies or interventions.