Ostead Company Is Considering an Investment with the Following Data

question 59

Multiple Choice

Ostead Company is considering an investment with the following data:
Depreciation will be taken on a straight-line basis over the expected life of the investment.
$$\begin{array} { l r } \text { Initial cost } & \$ 200,000 \\\text { Annual net cash inflows } & \$ 25,000 \\\text { Expected life } & 10 \text { years } \\\text { Salvage value } & \text { none }\end{array}$$
-Refer to the Figure.What is the accounting rate of return for the investment?

• A)2.5%
• B)10.0%
• C)12.5%
• D)20.0%

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