1. An investment has an initial cost of $462,000 and will generate the net income amounts shown below. This investment will be depreciated straight-line to zero over the four-year life of the project. Should this project be accepted based on the average accounting rate of return if the required rate is 14.75 percent? Why or why not? Picture A. Yes, because the AAR is equal to 14.75 percent B. Yes, because the AAR is greater than 14.75 percent C. Yes, because the AAR is less than 14.75 percent D. No, because the AAR is greater than 14.75 percent E. No, because the AAR is less than 14.75 percent
2. You are considering the following two mutually exclusive projects. The crossover point is _____ percent and Project _____ should be accepted at a discount rate of 9 percent. YEAR PROJECT A PROJECT B. 0 -69,000 -69,000 1 13,000 29,000 2 33,000 24,000 3 38,000 27,000 A. 15.68 percent; B B. 11.38 percent; A C. 11.38 percent; B D. 15.68 percent; A E. 14.02 percent; B