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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

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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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