PQR Enterprises is assessing two projects, Project One and Project Two, each requiring an initial...
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Accounting
PQR Enterprises is assessing two projects, Project One and Project Two, each requiring an initial investment of CAD 60,000. The after-tax cash inflows are as follows:
Year | Cash Flows (Project One) | Cash Flows (Project Two) |
Initial Investment | (60,000) | (60,000) |
1 | 20,000 | 15,000 |
2 | 20,000 | 20,000 |
3 | 10,000 | 25,000 |
4 | 10,000 | 25,000 |
a. Calculate the Accounting Rate of Return (ARR) for each project.
b. Which project should the company select if the target ARR is 10%?
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