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. Your firm requires an average accounting return (AAR) of at least 11 percent on all fixed asset purchases. Currently, you are considering some new
. Your firm requires an average accounting return (AAR) of at least 11 percent on all fixed asset purchases. Currently, you are considering some new equipment costing $180,000. This equipment will have a 3-year life over which time it will be depreciated on a straight line basis to a zero book value. The average book value is $90,000. The annual net income from this project is estimated at $12,500, $18,500, and $8,000 for the 3 years. Should you accept this project based on the accounting rate of return? Why or why not?
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