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soldi70 [24.7K]
3 years ago
5

An investment has an initial cost of $2.7 million and net income of $189,400, $178,600, and $172,500 for Years 1 to 3. The avera

ge book value is $1.35 million. Should this project be accepted based on the average accounting rate of return if the required rate is 12.5 percent? Why or why not?
a. Yes, because the AAR is 12.5 percent
b. Yes, because the AAR is less than 12.5 percent
c. Yes, because the AAR is greater than 12.5 percent
d. No, because the AAR is greater than 12.5 percent
e. No, because the AAR is less than 12.5 percent
Business
1 answer:
DochEvi [55]3 years ago
4 0

Answer: c. Yes, because the AAR is greater than 12.5 percent

Explanation:

Average Accounting rate of return = Average Net Income / Average Assets

Average Net income = (189,400 + 178,600 + 172,000) / 3 years

= $180,166.66667

Average Assets = 2,700,000 / 3 years

= $900,000

Average Account rate of return = 180,166.66667/ 900,000

= 20.01%

<em>The AAR at 20.01% is greater than the required rate which is 12.5% so the project should be accepted. </em>

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Answer:

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I hope my answer helps you

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4 years ago
A _____ is applied to reduce estate tax when a large amount of real estate is for sale in one area.
adelina 88 [10]

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8 0
2 years ago
This year, Major Healy paid $40,000 of interest on a mortgage on his home (he borrowed $800,000 to buy the residence in 2015; $9
icang [17]

Answer:

$50,000

Explanation:

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3 years ago
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Stella [2.4K]

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