An Investment Has an Initial Cost of $462,000 and Will

question 101

Multiple Choice

An investment has an initial cost of $462,000 and will generate the net income amounts shown below.This investment will be depreciated straight-line to zero over the four-year life of the project.Should this project be accepted based on the average accounting rate of return if the required rate is 14.75 percent? Why or why not? $$\begin{array} { | c | r | } \hline \text { Year } & \text { Net Income } \\\hline 1 & \$ 27,000 \\\hline 2 & 24,800 \\\hline 3 & 37,500 \\\hline 4 & 45,000 \\\hline\end{array}$$

• A)Yes, because the AAR is equal to 14.75 percent
• B)Yes, because the AAR is greater than 14.75 percent
• C)Yes, because the AAR is less than 14.75 percent
• D)No, because the AAR is greater than 14.75 percent
• E)No, because the AAR is less than 14.75 percent

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Legitimate Power

The authority derived from a formal position or role in an organization, which allows someone to influence others.

Supplier

A supplier is an entity that provides goods or services to another organization, playing a crucial role in the supply chain by influencing product quality, costing, and availability.

Walmart

An American multinational retail corporation that operates a chain of hypermarkets, discount department stores, and grocery stores.