Accepted based on the average accounting rate of return

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Reference no: EM131323875

An investment has an initial cost of $2.7 million and net income of $189,400, $178,600, and $172,500 for Years 1 to 3. This investment will be depreciated by $900,000 a year over the three-year life of the project. Should this project be accepted based on the average accounting rate of return if the required rate is 12.5 percent? Why or why not?

Yes, because the AAR is 12.5 percent

Yes, because the AAR is less than 12.5 percent

Yes, because the AAR is greater than 12.5 percent

No, because the AAR is greater than 12.5 percent

No, because the AAR is less than 12.5 percent

Reference no: EM131323875

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