1.

value: 10.00 points

Required information

The Average Accounting Return (AAR) Rule states that a company will accept a project that has an average account return that:

A. exceeds a pre-determined target average accounting return.

B. is less than a pre-determined target average accounting return.

C. exceeds the net present value for the company.

D. is less than the net present value for the company.

E. is equal to the increase of the net income over the past year.

2.

value: 10.00 points

Required information

Based upon the following data: calculate the Average Accounting Return

Net Income:
Year 1:	$	1,500,000
Year 2:	$	1,200,000
Year 3:	$	1,050,000
Year 4:	-$	1,400,000
Year 5:	$	1,350,000

The starting book value is $11,840,000, which will end with $0, at the end of five years.

A. 6.25%

B. 10%

C. 12.5%

D. 20%

E. 25%

3.

value: 10.00 points

Required information

According to the video, which of the following are disadvantages of the Average Accounting Return (AAR)?

rev: 11_05_2018_QC_CS-146737

A. Time value of money is ignored.

B. An arbitrary benchmark cutoff rate is established.

C. Market values are not considered.

D. All of the above.

E. A & C only.