Your Firm Requires an Average Accounting Return (AAR)of at Least

Multiple Choice

Your firm requires an average accounting return (AAR) of at least 15 per cent on all fixed Asset purchases.Currently,you are considering some new equipment costing $96 000.This equipment will have a three-year life over which time it will be depreciated on a straight line basis to a zero book value.The annual net income from this project is estimated at $5500,$12 400,and $17 600 for the three years.Should you accept this project based on the accounting rate of return? Why or why not?

A) yes;because the AAR is less than 15 per cent
B) yes;because the AAR is equal to 15 per cent
C) yes;because the AAR is greater than 15 per cent
D) no;because the AAR is less than 15 per cent
E) no;because the AAR is equal to 15 per cent