Question 10

An investment has an initial cost of $410,000 and will generate the net income amounts shown below. This investment will be depreciated straight line to zero over the 4-year life of the project. Should this project be accepted based on the average accounting rate of return if the required rate is 16 percent? Why or why not?

Year Net Income

1 $21,000

2 24,800

3 37,500

4 45,000

Group of answer choices

Yes; because the AAR is greater than 16 percent

No; because the AAR is less than 16 percent

Yes; because the AAR is less than 16 percent

Yes; because the AAR is equal to 16 percent

No; because the AAR is greater than 16 percent

Question 11

Which of the following is NOT a relevant cashflow to consider in solving for a project's NPV?

Group of answer choices

Operating cash flow

Interest

Net working capital

Aftertax salvage value

Initial cost