A company is evaluating 3 possible investments. Each uses straight-line depreciation. See data below: What is the rate of return for Project B?

Question

A company is evaluating 3 possible investments. Each uses straight-line depreciation. See data below:  What is the rate of return for Project B?

Quizplus · Accepted Answer

The rate of return for Project A is calculated as (70-50)/50 = 0.4 = 40%. The rate of return for Project B is (120-100)/100 = 0.2 = 20%. The rate of return for Project C is (150-130)/130 = 0.154 = 15.4%. Therefore, the best choice is Project C with a rate of return of 18%.

A Company Is Evaluating 3 Possible Investments