Desiree, Inc

Multiple Choice

Desiree, Inc. is considering adding a new product with a start-up cost of $540,000. This cost will be depreciated over 3 years, which is the estimated life of the product. Desiree has a 34% marginal tax rate. The net income for each of the three years is estimated at $15,000, $45,000, and $80,000. What is the average accounting return for the new product?

A) 8.64%
B) 11.30%
C) 17.28%
D) 21.00%
E) 25.93%