The Blue Moon Is Considering a Project Which Will Produce

Multiple Choice

The Blue Moon is considering a project which will produce sales of $120,000 a year for the next five years. The profit margin is estimated at 5.5 %. The project will cost $140,000 and will be depreciated straight-line to a book value of zero over the life of the project. The firm has a required accounting return of 9.5 %. This project should be _____ because the AAR is _____ %.

A) Rejected; 4.71
B) Rejected; 8.57
C) Rejected; 9.43
D) Accepted; 9.67
E) Accepted; 9.43