O'Mally Department Stores is considering two possible expansion plans. One proposal involves opening five stores in Indiana at the cost of $1,920,000. Under the other proposal, the company would focus on Kentucky and open six stores at a cost of $2,500,000. The following information is available:

Indiana proposal Kentucky proposal

Required investment $1,920,000 $2,500,000

Estimated life 10 years 10 years

Estimated residual value $50,000 $80,000

Estimated annual cash inflows over the next 10 years $400,000 $500,000

Required rate of return 10% 10% T

he accounting rate of return for the Kentucky proposal is closest to 20.00%. 11.09%. 10.32%. 10.00%.