Question: I am considering two mutually exclusive 3- year projects. Project A requires an investment in equipment of $120,000 and will produce net income of $20,000

I am considering two mutually exclusive 3- year projects. Project A requires an investment in equipment of $120,000 and will produce net income of $20,000 per year. Project B requires an investment in equipment of $90,000 and produces net income of $16,000 per year. Each project is 3 years and requires a $5,000 investment in inventory. The firm uses straight-line depreciation and depreciates all assets to zero. The discount rate is 12%. Ignore taxes.

what is the average accounting rate of return for project A?

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