A project has an initial cost of $32,000 and a 4-year life.The company uses straightline depreciation to a book value of zero over the life of the project.The projected net income from the project is $1,200,$2,200,$3,500,and $2,700 a year for Years 1 to 4,respectively.What is the average accounting return?
A)3.55%
B)14.13%
C)4.28%
D)7.11%
E)15.00%

Question

Quizplus · Accepted Answer

Average net income = ($1,200 + 2,200 + 3,500 + 2,700)/4 = $2,400Average book value = ($32,000 + 24,000 + 16,000 + 8,000 + 0)/5 = $16,000AAR = $2,400/$16,000 = .1500,or 15.00%

A Project Has an Initial Cost of $32,000 and a 4-Year