An Investment Has an Initial Cost of $2

question 70

Multiple Choice

An investment has an initial cost of $2.7 million and net income of $189,400, $178,600, and $172,500 for Years 1 to 3.This investment will be depreciated by $900,000 a year over the three-year life of the project.Should this project be accepted based on the average accounting rate of return if the required rate is 12.5 percent? Why or why not?

• A)Yes, because the AAR is 12.5 percent
• B)Yes, because the AAR is less than 12.5 percent
• C)Yes, because the AAR is greater than 12.5 percent
• D)No, because the AAR is greater than 12.5 percent
• E)No, because the AAR is less than 12.5 percent

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Definitions:

Cultural Tightness

The strength and enforcement of social norms and the level of tolerance for deviant behavior within a culture.

Standards for Behaviour

Established norms or criteria that guide acceptable and appropriate actions within a society or organization.

Individualistic Societies

Individualistic Societies prioritize the needs and goals of the individual over the collective, often resulting in a loose social framework where personal achievement and independence are valued.

Collective Societies

Cultures that prioritize the needs and goals of the group over the desires and success of individual members.