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

question 58

Multiple Choice

Newman Automobiles Manufacturing is considering two alternative investment proposals with the following data:
$$\begin{array} { | l | c | c | } \hline & \text { Proposal X} & \text { Proposal Y } \\\hline \text { Investment } & \$ 11,000,000 & \$ 450,000 \\\hline \text { Useful life } & { 5 \text { years } } &{ \text { 5 years } } \\\hline \text { Estimated annual net cash inflows for 5 years } & \$ 2,200,000 & \$ 99,000 \\\hline \text { Residual value } & \$ 55,000 & \$ 26,000 \\\hline \text { Depreciation method } & \text { Straight-line } & \text { Straight-line } \\\hline \text { Required rate of return } & 14 \% & 10 \% \\\hline\end{array}$$
Calculate accounting rate of return for Proposal Y.

• A) 10.91%
• B) 16.54%
• C) 10.64%
• D) 5.97%

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Definitions:

Positive Linear

Refers to a direct relationship where as one variable increases, the other variable also increases at a constant rate.

Operational Definition

A clear, precise definition of a variable that specifies how it will be measured or manipulated in a study.

Operationalize

The process of defining a research variable or concept so it can be measured or empirically examined.

Mood Swing

Rapid and intense changes in emotional state or mood.