A Company Is Evaluating Three Possible Investments What Is the Accounting Rate of Return for Project C

question 64

Multiple Choice

A company is evaluating three possible investments. Each uses straight-line method of depreciation. Following information is provided by the company. $$\begin{array} { | l | r | r | r | } \hline & \text { Project A } & \text { Project B } & \text { Project C } \\\hline \text { Investment } & 200,000 & \$ 50,000 & \$ 200,000 \\\hline \text { Salvage value } & 0 & 5,000 & 50,000 \\\hline \text { Net cash flows: } & & & \\\hline \text { Year 1 } & 50,000 & 25,000 & 80,000 \\\hline \text { Year 2 } & 50,000 & 16,000 & 50,000 \\\hline \text { Year 3 } & 50,000 & 12,000 & 60,000 \\\hline \text { Year 4 } & 50,000 & 9,000 & 20,000 \\\hline \text { Year 5 } & 50,000 & \mathbf { 0 } & \mathbf { 0 } \\\hline\end{array}$$ What is the accounting rate of return for Project C?

• A) 15%
• B) 12%
• C) 18%
• D) 10%

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Definitions:

Possession

The state of having, owning, or controlling something, or in some contexts, a state in which a person is believed to be influenced or controlled by an external entity.

Nervous Breakdown

A non-medical term that signifies a period of intense mental distress, where an individual is unable to function normally in everyday life.

Mental Hygiene Movement

A movement started by Dorothea Dix (1802–1887), a Boston schoolteacher, characterized by a desire to protect and provide humane treatment for the mentally ill. Her campaign resulted directly in the opening of 32 state hospitals, including 2 in Canada. Despite the noble aims, the asylums were overcrowded and the staff had no time to do more than warehouse and restrain the patients.

Psychosocial Treatments

Therapeutic interventions that focus on improving psychological well-being and social functioning through counseling, psychotherapy, and community support.