Question
A company is evaluating three possible investments. Each uses the straight −linemethod of depreciation. Following information...
A company is evaluating three possible investments. Each uses the
straight −linemethod of depreciation. Following information is provided by the company:
|
Project A |
Project B |
Project C |
|
|
Investment |
$ 228 comma 000$228,000 |
$ 50 comma 000$50,000 |
$ 228 comma 000$228,000 |
|
Residual value |
0 |
14 comma 00014,000 |
30 comma 00030,000 |
|
Net cash inflows: |
|||
|
Year 1 |
60 comma 00060,000 |
34 comma 00034,000 |
86 comma 00086,000 |
|
Year 2 |
60 comma 00060,000 |
25 comma 00025,000 |
56 comma 00056,000 |
|
Year 3 |
60 comma 00060,000 |
21 comma 00021,000 |
66 comma 00066,000 |
|
Year 4 |
60 comma 00060,000 |
18 comma 00018,000 |
26 comma 00026,000 |
|
Year 5 |
60 comma 00060,000 |
0 |
0 |
What is the accounting rate of return for Project B? (Round your answer to two decimal places.)
A.
39.5539.55%
B.
48.4448.44%
C.
25.5225.52%
D.
45.9545.95%
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