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What is the accounting rate of return for proposal y

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Reference no: EM131590068

Question - Gomez Corporation is considering two alternative investment proposals with the following data:

Investment: Proposal X - $850,000; Proposal Y - $468,000

Useful Life: Proposal X - 8 years; Proposal Y - 8 years

Estimated Annual Net Cash Inflows for 8 years: Proposal X - $125,000; Proposal Y - $78,000

Residual Value: Proposal X - $40,000; Proposal Y - $---

Depreciation Method: Proposal X - Straight-line; Proposal Y - Straight-line

Required Rate of Return: Proposal X - 14%; Proposal Y - 10%

What is the accounting rate of return for Proposal Y?

A) 29.17%

B) 5.24%

C) 4.17%

D) 16.67%

Reference no: EM131590068

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