Average Rate of Return Determine the average rate of return for a project that is estimated to yield total income of $326,700 over three years, has a cost of $631,600, and has a $94,400 residual value. Round to the nearest whole number.

Average Rate of Return Determine the average rate of return for a project that is estimated to yield total income of $326,700 over three years, has a cost of $631,600, and has a $94,400 residual value. Round to the nearest whole number.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 1BE: Average rate of return Determine the average rate of return for a project that is estimated to yield...

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Question

Average Rate of Return

Determine the average rate of return for a project that is estimated to yield total income of $326,700 over three years, has a cost of $631,600, and has a $94,400 residual value. Round to the nearest whole number.

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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Average rate of return can be calculated by net average income divided by average investment.

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