Average Rate of Return Determine the average rate of return for a project that is estimated...

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Average Rate of Return Determine the average rate of return for a project that is estimated to yield total income of $180,000

business accounting

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Answer 1

Answer #1

Average net income = Total net income / Total years = $180,000 / 5	$ 36,000

Average investment = ( Cost + Residual value ) / 2 = ( $400,000 + $50,000 ) / 2	$ 225,000

Average rate of return = Average net income / Average investment = $36,000 / $225,000	16%

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Answer 2

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