Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. 3. a project has an initial cost of $30,000 and a

3. A project has an initial cost of $30,000 and a 3-year life. The company...

50.1K

Verified Solution

Question

Finance

3. A project has an initial cost of $30,000 and a 3-year life. The company uses straight-line depreciation to a book value of zero over the life of the project. The projected average net income from the project is $1,766.67 per year for the next 3 years, respectively. What is the accounting rate of return based on average investment?

A. 11.78 percent

B. 14.69 percent

C. 8.72 percent

D. 11.04 percent

4. You are considering two mutually exclusive projects with the following cash flows. Which project(s) should you accept if the discount rate is 8.5 percent? What if the discount rate is 13 percent?

Year Project A Project B 0 -$80,000 -$80,000 1 31,000 0 2 31,000 0 3 31,000 110,000 A. accept project B as it always has the higher NPV

B. accept B at 8.5 percent and neither at 13 percent

C. accept project A as it always has the higher NPV

D. accept A at 8.5 percent and B at 13 percent

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students