Alpha Zeta Is Considering Purchasing Some New Equipment Costing $390,000

Multiple Choice

Alpha Zeta is considering purchasing some new equipment costing $390,000. The equipment will be depreciated on a straight line basis to a zero book value over the four-year life of the project. Projected net income for the four years is $18,900, $21,300, $26,700, and $25,000. What is the average accounting rate of return?

A) 11.78 percent
B) 11.93 percent
C) 12.01 percent
D) 12.49 percent
E) 13.20 percent