A Project Has Average Net Income of $5,900 a Year

question 76

Multiple Choice

A project has average net income of $5,900 a year over its 6-year life.The initial cost of the project is $98,000 which will be depreciated using straight-line depreciation to a book value of zero over the life of the project.The firm wants to earn a minimum average accounting return of 11.5 percent.The firm should _____ the project because the AAR is _____ percent.

• A)accept; 5.71
• B)accept; 9.90
• C)accept; 12.04
• D)reject; 5.71
• E)reject; 12.04

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Definitions:

Formal Authority

The power given to an individual or an entity based on their role or position within an organization, allowing them to make decisions and enforce rules.

Buying Center

A group of individuals within an organization who are involved in the decision-making process for purchasing goods or services.

Gatekeeper

In information theory, gatekeepers are individuals or policies that control the flow of information and access to resources within an organization.

Logistics

Those activities that focus on getting the right amount of the right products to the right place at the right time at the lowest possible cost.