Question: 1. Is a 15% accounting rate of return for a machine a good rate?
2. A company can invest in only one of two projects, A or B. Each project requires a $20,000 investment and is expected to generate end-of-period, annual cash flows as follows:
Year 1 Year 2 Year 3 Total
Project A . . . . . . . . $12,000 $8,500 $4,000 $24,500
Project B . . . . . . . . . 4,500 8,500 13,000 26,000
Assuming a discount rate of 10%, which project has the higher net present value?