GlenGary Investment Corporation is analyzing a proposal to build condo units in

Question

GlenGary Investment Corporation is analyzing a proposal to build condo units in southern Florida. The project will require an initial investment of $500,000. The building has a useful life of 15 years, a residual value of $200,000, and is depreciated on a straight - line basis. GlenGary uses the accounting rate of return model to evaluate investment projects. What is the minimum annual operating income that must be generated by this project to achieve the 8% accounting return required by GlenGary? of $200,0, adis de that must be generated by this O A. $33,333 O B. $16,000 O C. $24,000 O D. $40,000

Explanation / Answer

Calculate minimum operating income :

Minimum operating income = 500000*8% = 40000

so answer is d) 40000

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