Mountain Frost is considering a new project with a book value of 132,500 The equipment will be depreciated on a straight-line basis to a zero book value over the four-year life of the project. The projected net income for each year is 21,200, 22,100, 24,600 and 18,100 respectively. What is the average accounting return? A 8.11% B 14.87% C 17.39% D 16.23%

Here's how to calculate the Average Accounting Return (AAR):<br /><br />1. **Calculate the average net income:**<br /><br /> (21200 + 22100 + 24600 + 18100) / 4 = $21,500<br /><br />2. **Calculate the average book value:**<br /><br /> Since the asset depreciates evenly to zero over four years, the average book value is simply the initial book value divided by 2:<br /><br /> $132,500 / 2 = $66,250<br /><br />3. **Calculate the AAR:**<br /><br /> AAR = (Average Net Income / Average Book Value) * 100<br /><br /> AAR = ($21,500 / $66,250) * 100 <br /> AAR ≈ 32.45%<br /><br />Since 32.45% isn't one of the provided options, let's examine where the question might have intended a different calculation. Sometimes, the *initial* book value is used instead of the *average* book value when calculating AAR. Let's calculate that:<br /><br />AAR = (Average Net Income / Initial Book Value) * 100<br />AAR = ($21,500 / $132,500) * 100<br />AAR ≈ 16.23%<br /><br />Therefore, the closest answer is **D. 16.23%**. It seems the question's intent was to use the initial book value, not the average book value, in the AAR calculation.<br />