A Project Requires an Investment of $40,000 in Equipment

Multiple Choice

A project requires an investment of $40,000 in equipment. Annual cash flows of $8,000 are expected to occur for the next eight years. No salvage value is expected. The company uses the straight-line method of depreciation with no mid-year convention. Ignore income taxes. The accounting rate of return on the original investment for the project is

A) 6.25%.
B) 7.50%.
C) 16.00%.
D) 20.00%.