A company is evaluating three possible investments. Each uses the straight – line method of depreciation. The following information is provided by the company: Project A Project B Project C $236,000 $52,000 $236,000 14,000 Investment Residual value 38,000 Net cash inflows: 60,000 60,000 60,000 60,000 60,000 30,000 21,000 17,000 14,000 80,000 50,000 60,000 20,000 Year 1 Year 2 Year 3 Year 4 Year 5
A company is evaluating three possible investments. Each uses the straight – line method of depreciation. The following information is provided by the company: Project A Project B Project C $236,000 $52,000 $236,000 14,000 Investment Residual value 38,000 Net cash inflows: 60,000 60,000 60,000 60,000 60,000 30,000 21,000 17,000 14,000 80,000 50,000 60,000 20,000 Year 1 Year 2 Year 3 Year 4 Year 5
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:A company is evaluating three possible investments. Each uses the straight – line method of depreciation. The following information is provided by the company:
Project A
$236,000
Project B
Project C
Investment
$52,000
14,000
$236,000
Residual value
38.000
Net cash inflows:
Year 1
60,000
30,000
80,000
Year 2
60,000
21,000
50,000
60,000
60,000
60,000
Year 3
17.000
60,000
Year 4
14,000
20,000
Year 5
What is the accounting rate of return for Project C? (Round your answer to two decimal places.)
.....
O A. 12.71%
O B. 26.92%
O c. 8.47%
O D. 2.19%
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