GlenGary Investment Corporation Is Analyzing a Proposal to Build Condo

question 180

Multiple Choice

GlenGary Investment Corporation is analyzing a proposal to build condo units in southern Florida. The project will require an initial investment of $300,000. The building has a useful life of 25 years, a residual value of $100,000, and is depreciated on a straight-line basis. GlenGary uses the accounting rate of return model to evaluate investment projects. What is the minimum annual operating income that must be generated by this project to achieve the 9% accounting return required by GlenGary?

• A)$9000
• B)$27,000
• C)$12,000
• D)$18,000

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Definitions:

Indifference Curves

Graphical representations in microeconomics to illustrate different combinations of goods between which a consumer is indifferent.

Utility Function

A mathematical representation that ranks preferences or satisfaction levels consumers derive from different bundles of goods.

Perfect Substitutes

Products or goods that can replace each other perfectly with no loss of utility to the consumer.

Utility Function

A mathematical representation of a consumer's preference ranking over a set of goods or services, indicating satisfaction levels.