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:

Supreme Executive Power

The ultimate authority vested in an executive head of state or government, responsible for enforcing laws and governing.

Shared Power

The distribution of governmental responsibilities and powers between different branches or levels of government to prevent abuse of authority.

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A course of action adopted and pursued by a government or political party on national issues.

States' Powers

The rights and responsibilities allocated to state governments, as distinguished from those vested in the federal government, under a federal system of governance.