You're Trying to Determine Whether to Expand Your Business by Building

question 19

Multiple Choice

You're trying to determine whether to expand your business by building a new manufacturing plant.The plant has an installation cost of $12 million,which will be depreciated straight-line to zero over its 4-year life.The plant has projected net income of $1,095,000,$902,000,$1,412,000,and $1,724,000 over these 4 years.What is the average accounting return?

• A)10.70 percent
• B)15.63 percent
• C)18.87 percent
• D)21.39 percent
• E)23.05 percent

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Definitions:

Short and Long Run

Distinct time frames in economics and business planning, where "short run" involves immediate operations and "long run" focuses on future strategy and structural changes.

Strategic Opportunism

A way of making decisions that balances long-term goals with the flexibility to take advantage of immediate opportunities.

Long-Term Objectives

Goals that an organization aims to achieve over an extended period, typically beyond one year, to guide strategic direction and growth.

Short-Term Problems

Issues or challenges that need immediate resolution but do not typically affect long-term performance or strategy.