The Nifty Fifty is considering opening a new store at a start-up cost of $720,000.The initial investment will be depreciated straight-line to zero over the 15-year life of the project.What is the average accounting rate of return?
A)13.05 percent
B)13.68 percent
C)14.01 percent
D)14.18 percent
E)14.35 percent

Question

The Nifty Fifty is considering opening a new store at a start-up cost of $720,000.The initial investment will be depreciated straight-line to zero over the 15-year life of the project.What is the average accounting rate of return? 
A)13.05 percent 
B)13.68 percent 
C)14.01 percent 
D)14.18 percent 
E)14.35 percent

Quizplus · Accepted Answer

AAR = {[($62,000 × 5) + ($54,000 × 5) + ($39,000 × 5)]/15}/[($720,000 + $0)/2] = 14.35 percent

The Nifty Fifty Is Considering Opening a New Store at a Start-Up