Question: You are looking at a three-year project with a projected net income of $1,000 in Year 1, $2,000 in Year 2, and $4,000 in Year

You are looking at a three-year project with a projected net income of $1,000 in Year 1, $2,000 in Year 2, and $4,000 in Year 3. The cost is $9,000, which will be depreciated straight-line to zero over the three-year life of the project. Should this project be accepted based on the average accounting rate of return if the required rate is 30.5 percent?

A. No, because the AAR is greater than 30.5 percent.

B. No, because the AAR is less than 30.5 percent.

C. Yes, because the AAR is 30.5 percent.

D. Yes, because the AAR is equal to 30.5 percent.

E. Yes, because the AAR is greater than 30.5 percent.

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