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

question 29

Multiple Choice

A company is evaluating three possible investments.Each uses straight-line method of depreciation.Following information is provided by the company.
$\begin{array}{|l|l|l|l|} \hline & \text { Project A } & \text { Project B } & \text { Project C } \\\hline \text { Investment } & \$ 216,000 & \$ 50,000 & \$ 216,000 \\\hline \text { Salvage value } &0 & 18,000 &28,000 \\\hline \text { Net cash flows: } & & & \\\hline \text { Year } 1 & 58,000 & 24,000 & 100,000 \\\hline \text { Year } 2 & 58,000 & 15,000 & 70,000 \\\hline \text { Year } 3 & 58,000 & 11,000 &80,000 \\\hline \text { Year } 4 & 58,000 & 8,000 & 40,000 \\\hline \text { Year } 5 & 58,000 & 0& 0 \\\hline\end{array}$
What is the accounting rate of return for Project B?

• A) 15.96%
• B) 19.12%
• C) 18.19%
• D) 33.87%

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Definitions:

Prepurchase Evaluations

The process by which consumers assess and consider various products, brands, or services before making a purchase decision.

Search Credence Properties

Attributes of a product or service that are difficult to evaluate even after purchase and consumption, often requiring expertise or significant experience to assess.

Experience Properties

Characteristics of products or services that cannot be easily assessed before purchase and are primarily evaluated through direct experience, such as taste, satisfaction, or efficiency.

Legal Services

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