A Project Produces Annual Net Income of $9,500, $12,500, and $15,500

Multiple Choice

A project produces annual net income of $9,500, $12,500, and $15,500 over the three years of its life, respectively. The initial cost of the project is $260,400. This cost is depreciated straight-line to a zero book value over three years. What is the average accounting rate of return if the required discount rate is 7 %?

A) 4.80 %
B) 7.32 %
C) 8.97 %
D) 9.60 %
E) 10.27 %