McAfee Automobiles Manufacturing Is Considering Two Alternative Investment Proposals with the Following

question 63

Multiple Choice

McAfee Automobiles Manufacturing is considering two alternative investment proposals with the following data: $$\begin{array} { | l | r | r | } \hline & \text { Proposal } X & \text { Proposal Y } \\\hline \text { Investment } & \$ 10,500,000 & \$ 500,000 \\\hline \text { Useful life } & 5 \text { years } & 5 \text { years } \\\hline \text { Estimated annual net cash inflows for 5 years } & \$ 2,100,000 & \$ 105,000 \\\hline \text { Residual value } & \$ 52,000 & \$ 32,000 \\\hline \text { Depreciation method } & \text { Straight-line } & \text { Straight-line } \\\hline \text { Required rate of return } & 13 \% & 12 \% \\\hline\end{array}$$ Calculate the accounting rate of return for Proposal Y.(Round any intermediate calculations and your final answer to two decimal places. )

• A)13.87%
• B)12.63%
• C)4.29%
• D)9.52%

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