ABC Corp. invests $550,000 this year in a three-year project. The investment will have the salvage value of $100,000. The performance of the project over the three=year span was as follows:

At Year 1, the project had $255,000 in revenues, $45,000 in costs of goods sold, $34,000 in other operating expenses, and $20,000 in interest payments. The tax rate was 21%.

At Year 2, the project had $265,000 in revenues, $47,000 in costs of goods sold, $32,000 in other operating expenses, and $20,000 in interest payments. The tax rate was 21%.

At Year 3, the project had $270,000 in revenues, $48,000 in costs of goods sold, $33,000 in other operating expenses, and $20,000 in interest payments. The tax rate was 21%.

What was the firms average accounting return during the three-year span?

Hint: Average Book Value of Assets = (Initial Investment + the asset's salvage (resale) value) / 2.

4.12%

4.93%

3.32%

2.87%

ABCD Corp. has a project where the Internal Rate of Return (IRR) is 10.05%. Which of the following is true? Assume that the project consists of an initial cash outlay (i.e. investments) that is followed by subsequent inflows.

The project will have a negative NPV if the interest/discount rate is 9.05%.

The project will have a negative NPV if the interest/discount rate is 11.92%.

The project will "break even" or have a zero NPV when the discount rate is 9.63%.

We need more information than just Internal Rate of Return (IRR) to observe whether the project will be profitable at a given interest/discount rate.