Williams Department Stores Is Considering Two Possible Expansion Plans -The Accounting Rate of Return for the Indiana Proposal Is

question 113

Multiple Choice

Williams Department Stores is considering two possible expansion plans.One proposal involves opening 5 stores in Indiana at the cost of $1,800,000.Under the other proposal,the company would focus on Kentucky and open 6 stores at a cost of $2,400,000.The following information is available: $$\begin{array} { | l | l | l | } \hline & \text { Indiana proposal } & \text { Kentucky proposal } \\\hline \text { Required investment } & \$ 1,800,000 & \$ 2,400,000 \\\hline \text { Estimated life } & 10 \text { years } & 10 \text { years } \\\hline \text { Estimated residual value } & \$ 50,000 & \$ 80,000 \\\hline \begin{array} { l } \text { Estimated annual cash inflows over } \\\text { the next } 10 \text { years }\end{array} & \$ 400,000 & \$ 500,000 \\\hline \text { Required rate of return } & 10 \% &10\% \\\hline\end{array}$$
-The accounting rate of return for the Indiana proposal is closest to:

• A)11.17%.
• B)12.22%.
• C)12.50%.
• D)22.22%.

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Definitions:

Cognitive Dissonance

The psychological discomfort experienced by an individual who holds two or more contradictory beliefs, ideas, or values at the same time.

Collectivist Cultures

Societies or cultures that prioritize the needs and goals of the group over those of the individual.

Actor-Observer Bias

The tendency to attribute one's own actions to external causes while attributing others' actions to their internal characteristics.

External Attribution

The process of attributing the cause of an individual's behavior to external factors, such as the environment or situational circumstances.