Woodcrafters requires an average accounting return (AAR) of at least 17 percent on all fixed asset purchases. Currently, it is considering some new equipment costing $178,000. This equipment will have a four-year life over which time it will be depreciated on a straight-line basis to a zero book value. The annual net income from this equipment is estimated at $10,100, $10,300, $17,900, and $19,600 for the four years. Should this purchase occur based on the accounting rate of return? Why or why not?

Select one:

a. Yes, because the money will be recovered in 1.69 years

b. Yes, because the money will be recovered in 1.87 years

c. Yes, because the money will be recovered in 2.11 years

d. No, because the project never pays back

e. No, because the money will not be recovered in time to repay the loan