Question
1. value: 10.00 points Required information The Average Accounting Return (AAR) Rule states that a company will accept a project that has an average account
1.
value: 10.00 points
Required information
The Average Accounting Return (AAR) Rule states that a company will accept a project that has an average account return that:
A. exceeds a pre-determined target average accounting return.
B. is less than a pre-determined target average accounting return.
C. exceeds the net present value for the company.
D. is less than the net present value for the company.
E. is equal to the increase of the net income over the past year.
2.
value: 10.00 points
Required information
Based upon the following data: calculate the Average Accounting Return
Net Income: | |||
Year 1: | $ | 1,500,000 | |
Year 2: | $ | 1,200,000 | |
Year 3: | $ | 1,050,000 | |
Year 4: | -$ | 1,400,000 | |
Year 5: | $ | 1,350,000 | |
The starting book value is $11,840,000, which will end with $0, at the end of five years.
A. 6.25%
B. 10%
C. 12.5%
D. 20%
E. 25%
3.
value: 10.00 points
Required information
According to the video, which of the following are disadvantages of the Average Accounting Return (AAR)?
rev: 11_05_2018_QC_CS-146737
A. Time value of money is ignored.
B. An arbitrary benchmark cutoff rate is established.
C. Market values are not considered.
D. All of the above.
E. A & C only.
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