Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

ABC Corp. invests $500,000 this year in a five-year project. The investment will have the salvage value of $35,000. The performance of the project over

image text in transcribed
image text in transcribed
ABC Corp. invests $500,000 this year in a five-year project. The investment will have the salvage value of $35,000. The performance of the project over the five-year span was as follows: At Year 1, the project had $250,000 in revenues, $80,000 in costs of goods sold, $32,000 in other operating expenses, and $20.000 in interest payments. The tax rate was 19%. At Year 2, the project had $260,000 in revenues, $90,000 in costs of goods sold, $30,000 in other operating expenses, and $20,000 in interest payments. The tax rate was 19%. At Year 3, the project had $270,000 in revenues, $91,000 in costs of goods sold, $33,000 in other operating expenses, and $20,000 in interest payments. The tax rate was 19%. At Year 4, the project had $280,000 in revenues, $95,000 in costs of goods sold, $35,000 in other operating expenses, and $20,000 in interest payments. The tax rate was 18%. At Year 5 , the project had $295,000 in revenues, $96,000 in costs of goods sold, $36,000 in other operating expenses, and $20,000 in interest payments. The tax rate was 18%. What was the firm's average accounting return during the fiveyear span? 10.48% 6.50% 8.30% 11.00% Same facts as above: how would the answer change if the investment's salvage value increases to $65,000 ? 7.14% 10.48% 11.65% 9.56%

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Ziglar On Selling The Ultimate Handbook For The Complete Sales Professional

Authors: Zig Ziglar

1st Edition

0785288937, 978-0785288930

More Books

Students also viewed these Finance questions