Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows.

a. Nomander Company is considering the purchase of new equipment that will speed up the process for extracting copper. The equipment will cost $2,400,000 and have a life of five years with no expected salvage value. The expected cash flows associated with the project are as follows:

b. Marlene Straithe is considering investing in one of the following two projects. Either project will require an investment of $30,000. The expected revenues less cash expenses for the two projects follow. Assume each project is depreciable.

c. Suppose that a project has an accounting rate of return of 40 percent (based on initial investment) and that the average net income of the project is $160,000.
d. Suppose that a project has an accounting rate of return of 25 percent and that the investment is $100,000.

Required:
1. Compute the ARR on the new equipment that Nomander Company is considering.
2. Which project should Marlene Straithe choose based on the ARR?
3. How much did the company in scenario (c) invest in the project?
4. What is the average income earned by the project in scenario(d)?

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Year Cash Revenues Cash Expenses $4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 $3,200,000 3,200,000 3,200,000 3,200,000 3,200,000 Year Project A $9,000 12,000 15,000 30,000 30,000 Project B $ 9,000 12,000 18,000 9,000 9,000