Question: ABC Corp. invests $500,000 this year in a three-year project. The investment will have the salvage value of $140,000. The performance of the project over
ABC Corp. invests $500,000 this year in a three-year project. The investment will have the salvage value of $140,000. The performance of the project over the three-year span was as follows: At Year 1, the project had $250,000 in revenues, $30,000 in costs of goods sold, $32,000 in other operating expenses, and $20,000 in interest payments. The tax rate was 21%. At Year 2, the project had $280,000 in revenues. $40,000 in costs of goods sold, $30,000 in other operating expenses, and $20,000 in interest payments. The tax rate was 21%. At Year 3, the project had $270,000 in revenues, $41.000 in costs of goods sold, $33,000 in other operating expenses, and $20,000 in interest payments. The tax rate was 21%. What is this project's average accounting return during the three-year span? HINT: Be sure to set up your depreciation expenses based on the duration of the project. 17.25% OO 18.13% 16.11% 14 32% n Question 15 25 pts Same facts as above what is the average accounting return of this project if the salvage value is $0 (that is rather than $140,000)? 4.53% 35 6.12 The average accounting return would remain unchanged
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