A Project Has an Initial Cost of £38,000 and a Four-Year

question 43

Multiple Choice

A project has an initial cost of £38,000 and a four-year life.The company usesstraight-line depreciation to a book value of zero over the life of the project.The projected net income from the project is £1,000,£1,200,£1,500,and £1,700 a year for the next four years,respectively.What is the average accounting return?

• A)3.55%
• B)4.13%
• C)4.28%
• D)7.11%
• E)14.21%

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Definitions:

Cyclical Stock

Stocks whose prices are affected by macroeconomic changes in the economy.

Countercyclical Stock

Shares of companies that tend to perform well during economic downturns because they offer goods or services that remain in demand.

Portfolio Weight

The percentage composition of a particular holding or investment relative to the total value of the portfolio.

Expected Return

The forecasted amount of profit or loss an investment is projected to generate, expressed as a percentage of the total invested capital.