The Corporation is considering two alternative investment proposals with the following data:Proposal XProposal YInvestment$860,000$510,000Useful life8 years8 yearsEstimated annual netcash inflows for 8 years$130,000$68,000Residual value$42,000$-Depreciation methodStraight-lineStraight-lineRequired rate of return13%13%What is the accounting rate of return for Proposal X? (Round any intermediary calculations to the nearest dollar, and round your final answer to the nearest hundredth of a percent, X.XX%.) 2.62% 15.12% 3.23% 1.57%

Solution:- Calculation of the accounting rate of return for Proposal X as follows under:-

Answered: The Corporation is considering two…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 19EA: Redbird Company is considering a project with an initial investment of $265,000 in new equipment...

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The Corporation is considering two alternative investment proposals with the following data:

	Proposal X	Proposal Y
Investment	$860,000	$510,000
Useful life	8 years	8 years
Estimated annual net cash inflows for 8 years	$130,000	$68,000
Residual value	$42,000	$-
Depreciation method	Straight-line	Straight-line
Required rate of return	13%	13%

What is the accounting rate of return for Proposal X? (Round any intermediary calculations to the nearest dollar, and round your final answer to the nearest hundredth of a percent, X.XX%.)

		2.62%
		15.12%
		3.23%
		1.57%

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