Sinan is considering investing in a project with an initial cost of $74,000 and a four-year...
Sinan is considering investing in a project with an initial cost of $74,000 and a four-year life span. Sinan will depreciate the assets to zero on a straight-line basis over those four years. The projected net income from the project is $3,000, $4,400, $5,000, and $4,500 a year for the next four years, respectively. What is the project's average accounting return?
Homework Answers
Answer:
Average Net Income = ($3,000 + $4,400 + $5,000 + $4,500) /
4
Average Net Income = $4,225
Average Investment = ($74,000 + $0) / 2
Average Investment = $37,000
Average Accounting Return = Average Net Income / Average
Investment * 100
Average Accounting Return = $4,225 / $37,000 * 100
Average Accounting Return = 11.42%
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