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Photo Project 1 involves an outlay of $2.5m and gets an annual net income of $1m for 5 years. Project 2 involves an outlay of
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Project 1 involves an outlay of $2.5m and gets an annual net income of $1m for 5 years. Project 2 involves an outlay of $10m but gets no income until year 5. year 1 2 3 4 5 project 1 project 2 -2.5 1 1 1 1 1 -10 0 0 15 Use the payback method to decide which is the most attractive project. What is the accounting rate of return for project 1? Write your answer as a percent using the percent symbol. What is the accounting rate of return for project 2? Write your answer as a percent using the percent symbol. Decide which is the most attractive project using the accounting rate of return method.
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