Spacely Sprockets Inc is a new start-up evaluating a new project. They worry that they don't have all the requisite operating information they will need to estimate Cash Flows From Assets and that they wouldn't be able to evaluate this project based on NPV and IRR (which both use the CFFA's to evaluate). Instead they have decided to use the Average Accounting Return (AAR) rule to evaluate the project. What is the AAR for this project? (Enter your answer as a percentage and Round to 2 decimals) Accounting Info for Spacely Sprockets Year 1 Year 2 Year 3 Net Income 37,000 58,000 118,000 Book Value of Assets 686,000 560,000 672,000
Spacely Sprockets Inc is a new start-up evaluating a new project. They worry that they don't have all the requisite operating information they will need to estimate Cash Flows From Assets and that they wouldn't be able to evaluate this project based on NPV and IRR (which both use the CFFA's to evaluate). Instead they have decided to use the Average Accounting Return (AAR) rule to evaluate the project. What is the AAR for this project? (Enter your answer as a percentage and Round to 2 decimals) Accounting Info for Spacely Sprockets Year 1 Year 2 Year 3 Net Income 37,000 58,000 118,000 Book Value of Assets 686,000 560,000 672,000
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Spacely Sprockets Inc is a new start-up evaluating a new project. They worry that they don't have all the requisite operating information they will need to
estimate Cash Flows From Assets and that they wouldn't be able to evaluate this project based on NPV and IRR (which both use the CFFA's to evaluate).
Instead they have decided to use the Average Accounting Return (AAR) rule to evaluate the project. What is the AAR for this project? (Enter your answer
as a percentage and Round to 2 decimals)
Accounting Info for Spacely Sprockets
Year 1
Year 2
Year 3
Answer:
Net Income
37,000
58,000
118,000
Book Value of Assets
686,000
560,000
672,000
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