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[answered] A company is evaluating three possible investments. Each us


A company is evaluating three possible investments. Each uses straight?line method of depreciation. Following information is provided by the company.

Project A Project B Project C
Investment 200,000 $50,000 $200,000
Salvage value 0 5,000 50,000
Net cash?flows:
Year 1 50,000 25,000 80,000
Year 2 50,000 16,000 50,000
Year 3 50,000 12,000 60,000
Year 4 50,000 9,000 20,000
Year 5 50,000 0 0

What is the accounting rate of return for Project?C?


A. 10%

B. 18%

C. 12%

D. 15%


depreciation for project C

 

= 37500 year

 

cash flow

 

less: depreciation

 

profit 1

 

80000

 

37500

 

42500 average profit

 

investment

 

accounting rate of return

 

thus,

 

accounting rate of return is 10? 2

 

50000...

 


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