Talbot Company Expects Income of $2,000 Per Year Over the Life

Multiple Choice

Talbot Company expects income of $2,000 per year over the life of an investment that will cost $25,000. The calculation of the accounting rate of return is .16. The rate of return indicates that

A) Talbot expects to earn 16% of $2,000 as profit each year the asset is used.
B) Talbot expects to earn 16% of its investment annually.
C) Talbot expects to earn 16% of its cash outlay back over the life of the asset.
D) Talbot expects the asset will earn 16 times as much profit as its cost.