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

question 41

Multiple Choice

A company is evaluating three possible investments.Each uses the straight-line method of depreciation.The following information is provided by the company: $$\begin{array} { | l | r | r | r | } \hline & \text { Project A } & \text { Project B } & \text { Project C } \\\hline \text { Investment } & \$ 210,000 & \$ 54,000 & \$ 210,000 \\\hline \text { Residual value } & 0 & 30,000 & 28,000 \\\hline \text { Net cash flows: } & & & \\\hline \text { Year 1 } & 70,000 & 34,000 & 82,000 \\\hline \text { Year 2 } & 70,000 & 25,000 & 52,000 \\\hline \text { Year 3 } & 70,000 & 21,000 & 62,000 \\\hline \text { Year 4 } & 70,000 & 18,000 & 22,000 \\\hline \text { Year 5 } & 70,000 & 0 & 0 \\\hline\end{array}$$ What is the accounting rate of return for Project C? (Round your answer to two decimal places.)

• A) 14.29%
• B) 7.56%
• C) 33.33%
• D) 10.48%

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Definitions:

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A form of addiction characterized by the emotional or mental need for a substance or behavior, not necessarily associated with physical dependence.

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Impulse Buying

A spontaneous, unplanned decision to buy a product or service, made just before a purchase.

Compulsive Consumption

An uncontrollable drive to purchase goods or services in excess, often leading to personal distress or financial harm.