Asked by Kameron Teague on Jul 08, 2024
Verified
Determine the average rate of return for a project that is estimated to yield total income of $600,000 over 4 years, costs $840,000, and has an $80,000 residual value. Round percentage answer to one decimal place.
Average Rate of Return
A method of determining the profitability of an investment by dividing the average annual profit by the initial investment cost.
Total Income
The sum of all revenues and gains that a person or business receives over a period of time, before any expenses are subtracted.
- Conduct an assessment of the standard return on investment for capital initiatives.
Verified Answer
CC
Calandrea CamayJul 10, 2024
Final Answer :
Average annual income:
$150,000 ($600,000 ÷ 4 years)Average investment:
$460,000 [($840,000 + $80,000) ÷ 2]
Average rate of return:
32.6% ($150,000 ÷ $460,000)
$150,000 ($600,000 ÷ 4 years)Average investment:
$460,000 [($840,000 + $80,000) ÷ 2]
Average rate of return:
32.6% ($150,000 ÷ $460,000)
Learning Objectives
- Conduct an assessment of the standard return on investment for capital initiatives.
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