A year ago, Tom purchased 300 shares of WMT stock for $40,500. The stock is currently selling
Question:
A year ago, Tom purchased 300 shares of WMT stock for $40,500. The stock is currently selling for $163 a share and Tom has decided to sell all of his shares. What is total return that Tom has earned on this investment if he received an annual dividend $2.26 a share?
a. | -19.50% | |
b. | -18.00% | |
c. | 22.41% | |
d. | 17.38% |
Your firm requires an average accounting return (AAR) of at least 15% on all fixed asset purchases. Currently, you are considering some new equipment costing $487,500. This equipment will have a 6-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 $55,000 a year for the first 3 years and $28,000 a year for the following 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% | |
b. | no; because the AAR is greater to 15% | |
c. | yes; because the AAR is greater than 15% | |
d. | no; because the AAR is less than 15% |
South-Western Federal Taxation 2020 Comprehensive
ISBN: 9780357109144
43rd Edition
Authors: David M. Maloney, William A. Raabe, James C. Young, Annette Nellen, William H. Hoffman