A Project Has Average Net Income of $2,100 a Year

Multiple Choice

A project has average net income of $2,100 a year over its 4-year life. The initial cost of the project is $65,000 which will be depreciated using straight-line depreciation to a book value of zero over the life of the project. The firm wants to earn a minimal average accounting return of 8.5 %. The firm should _____ the project based on the AAR of _____

A) Accept; 6.46 %.
B) Accept; 9.69 %.
C) Accept; 12.92 %.
D) Reject; 6.46 %.
E) Reject; 12.92 %.