Question
The Selected Space Searching and Survey System is considering two projects for the same piece of property. They can build a Landing Vehicle (Project L)
The Selected Space Searching and Survey System is considering two projects for the same piece of property. They can build a Landing Vehicle (Project "L") or they can build a Survey Spacecraft (Project "S"), but they cannot build both on this same lot (that is, they are "mutually exclusive"). The cash flows associated with each project are listed below. The firm requires a 12% return on projects of this type and risk. Cash flows in parentheses "(x)" are negative, i.e., outflows.
What is the approximate Average Accounting Rate of Return for each project?
a.) AARL = 12% AARS = 12%
b.) AARL = 14% AARS = 15%
c.) AARL = 3.33 years AARS = 2.95 years
d.) The actual value cannot be calculated with the information given, but AARL= AARS
e.) There is no way to estimate AAR for these projects since we don't have accounting Income and book values.
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