Question
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
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, $30,000 in costs of goods sold, $32,000 in other operating expenses, and $20,000 in interest payments. The tax rate was 36%.
At Year 2, the project had $260,000 in revenues, $40,000 in costs of goods sold, $30,000 in other operating expenses, and $20,000 in interest payments. The tax rate was 36%.
At Year 3, the project had $270,000 in revenues, $41,000 in costs of goods sold, $33,000 in other operating expenses, and $20,000 in interest payments. The tax rate was 36%.
At Year 4, the project had $280,000 in revenues, $45,000 in costs of goods sold, $35,000 in other operating expenses, and $20,000 in interest payments. The tax rate was 36%.
At Year 5, the project had $295,000 in revenues, $46,000 in costs of goods sold, $36,000 in other operating expenses, and $20,000 in interest payments. The tax rate was 36%.
What was the firms average accounting return during the five-year span?
A. 20.19%
B. 11.36%
C. 31.55%
D. 25.43%
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