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Redwood Corporation is considering two alternative investment proposals with the following data: Proposal X Proposal Y Investment $ 810 comma 000$810,000 $ 486 comma 000$486,000
Redwood Corporation is considering two alternative investment proposals with the following data:
Proposal X | Proposal Y | |
Investment | $ 810 comma 000$810,000 | $ 486 comma 000$486,000 |
Useful life | 88 years | 88 years |
Estimated annual net cash inflows for88 years | $ 150 comma 000$150,000 | $ 81 comma 000$81,000 |
Residual value | $ 50 comma 000$50,000 | $minus |
Depreciation method | Straightminusline | Straightminusline |
Required rate of return | 1616% | 99% |
What is the accounting rate of return for Proposal X?
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