Plum Ltd is considering investing in a project that will generate the following cash flows over the next five years:

Year Future cash flows

Year 1 R198 000

Year 2 R156 000

Year 3 R199 500

Year 4 R209 880

Year 5 R120 220

The project will cost R535 000 to invest in and will be depreciated on the straight-line basis to a zero book value over the five years. Assuming that the average accounting rate for the project exceeds the target rate for Plumit means that...

		Plum Ltd can accept the project as it will have positive return for the company.
		Plum Ltd can reject the project as it will cost more because of the higher rate.
		Plum Ltd can accept the project as it will cost less because of the higher rate.
		Plum Ltd can accept the project as it will have higher rate of return than ARR.