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O'Mally Department Stores is considering two possible expansion plans. One proposal involves opening 5 stores in Indiana at the cost of $1,810,000. Under the other
O'Mally Department Stores is considering two possible expansion plans. One proposal involves opening 5 stores in Indiana at the cost of $1,810,000. Under the other proposal, the company would focus on Kentucky and open 6 stores at a cost of $2,000,000. The following information is available: Indiana proposal Kentucky proposal Required investment $1,810,000 $2,000,000 Estimated life 6 years 6 years Estimated residual value $80,000 $40,000 Estimated annual cash inflows over the next 6 years $700,000 $800,000 Required rate of return 13% 13% The accounting rate of return for the Indiana proposal is closest to (Round any intermediary calculations to the nearest dollar, and round your final answer to the nearest hundredth of a percent, X.XX%.). If accounting rate of return is used to make the decision then which project would be chosen? A. 23.67%.and the Indiana proposal would be selected B. 22.74%. and the Kentucky proposal would be selected C. 34.25%.and the Indiana proposal would be selected D. 38.67%.and the Kentucky proposal would be selected
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