What is the project average accounting return

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Reference no: EM132028864

You’re trying to determine whether to expand your business by building a new manufacturing plant. The plant has an installation cost of $9 million, which will be depreciated straight line to zero over its three-year life. The plant has projected net income of $1,200,000, $1,300,0000, and $1,100,000 over these three years.

a. What is the project’s average accounting return (AAR)?

b. If the cutoff rate is 20%, should the company accept or reject the project?

Reference no: EM132028864

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