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Calculate the accounting rate of return for this project

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Reference no: EM133158270

Question - Your family business has chosen to invest in a project that should generate cash flows of $132,000 per year for 5 years. The initial investment cost is $520,000.

a) Should we accept this project if the required payback period is 4 years.

b) Should we accept this project if the required discounted payback period is 4 years knowing that the discount rate is 4%.

c) Should we accept this project if the minimum rate of return required is 10%.

d) Suppose that each year, the expected annual net benefits of this project constitute 25% of the annual cash flows generated by this project. Calculate the accounting rate of return for this project by considering a linear amortization of the cost of the project.

Reference no: EM133158270

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