Question
A company is evaluating three possible investments. Each uses the straight-line method of depreciation. Following information is provided by the company: Project A Project B
A company is evaluating three possible investments. Each uses the straight-line method of depreciation. Following information is provided by the company:
| Project A | Project B | Project C | |
| Investment | $230,000 | $54,000 | $230,000 |
| Residual value | 0 | 12,000 | 36,000 |
| Net cash inflows: | |||
| Year 1 | 56,000 | 38,000 | 94,000 |
| Year 2 | 56,000 | 29,000 | 64,000 |
| Year 3 | 56,000 | 25,000 | 74,000 |
| Year 4 | 56,000 | 22,000 | 34,000 |
| Year 5 | 56,000 | 0 | 0 |
What is the accounting rate of return for Project B? (Round your answer to two decimal places.)
A.51.83%
B.38.14%
C.54.55%
D.26.19%
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Auditing and Assurance Services A Systematic Approach
Authors: William Messier Jr, Steven Glover, Douglas Prawitt
10th edition
77732502, 978-0077732509
