Question - The Silverside Company is considering investing in two alternative projects:
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Project 1
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Project 2
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Investment
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$600,000
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$280,000
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Useful life (years)
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9
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5
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Estimated annual net cash inflows for useful life
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$120,000
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$60,000
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Residual value
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$24,000
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$12,000
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Depreciation method
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Straight - line
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Straight - line
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Required rate of return
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14%
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8%
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Required - What is the accounting rate of return for Project? 2?
A. 4.29
B. 2.29%
C. 47.14%
D. 21.43%