Hick Limited is considering investing in a new project, for which the following information is available:

	Initial investment (000)	Year 1 (000)	Year 2 (000)	Year 3 (000)	Year 4 (000)
Cash flow	(500)	150	300	180	130
Depreciation		125	125	125	125

1. Calculate the average accounting return and advise Hick Limited whether to go ahead with the project (suppose the firm has a 20% targeted accounting rate of return)

2. What three flaws are in this decision based on average accounting return?