Question
Project A has cash flows of -$74,900, $18,400, $26,300, and $57,100 for years 0 to 3, respectively. Project B has cash flows or -$79,000, $18,400,
Project A has cash flows of -$74,900, $18,400, $26,300, and $57,100 for years 0 to 3, respectively. Project B has cash flows or -$79,000, $18,400, $22,700, and $51,500 for years 0 to 3 respectively. Both projects are independent and use straight line depreciation to a zero balance over the project life. Neither project has any salvage value and both have a required accounting return of 11.5 percent. Should you accept or reject these projects based on the average accounting return?
A. Accept Project A and reject Project B
B. Reject Project A and accept Project B
C. Accept both projects
D. Reject both projects
E. The AAR cannont be computed
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