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

question 34

Multiple Choice

A company is evaluating three possible investments.Each uses the straight-line method of depreciation.Following information is provided by the company: $$\begin{array} { | l | r | r | r | } \hline & \text { Project A } & \text { Project B } & \text { Project C } \\\hline \text { Investment } & \$ 228,000 & \$ 52,000 & \$ 228,000 \\\hline \text { Residual value } & 0 & 10,000 & 34,000 \\\hline \text { Net cash flows: } & & & \\\hline \text { Year 1 } & 56,000 & 24,000 & 86,000 \\\hline \text { Year 2 } & 56,000 & 15,000 & 56,000 \\\hline \text { Year 3 } & 56,000 & 11,000 & 66,000 \\\hline \text { Year 4 } & 56,000 & 8,000 & 26,000 \\\hline \text { Year 5 } & 56,000 & 0 & 0 \\\hline\end{array}$$ What is the accounting rate of return for Project B? (Round your answer to two decimal places.)

• A) 20.84%
• B) 9.82%
• C) 12.90%
• D) 12.22%

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Definitions:

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Psychological distress stemming from events experienced during childhood, which can lead to long-term mental and physical health issues.