Question
ABC Corp. invests $500,000 this year in a three-year project. The investment will have the salvage value of $50,000. The performance of the project over
ABC Corp. invests $500,000 this year in a three-year project. The investment will have the salvage value of $50,000. The performance of the project over the three-year span was as follows: At Year 1, the project had $260,000 in revenues, $35,000 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 $280,000 in revenues, $43,000 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 $290,000 in revenues, $42,000 in costs of goods sold, $33,000 in other operating expenses, and $22,000 in interest payments. The tax rate was 19%. What is this project's average accounting return during the three-year span?
10.11%
13.56%
12.48%
9.85%
Same facts as above: what is the average accounting return of this project if the salvage value is $0 (that is, rather than $50,000)?
5.20%
5.72%
6.51%
10.38%
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