What is the rate of return for the following incremental analysis. Investment 1 Initial Investment $23,877 $31,255 Annual Return $3,134 $10,237 Salvage Value $23,877 $31,255

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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What is the rate of return for the following incremental analysis.
Investment
1
2
Initial Investment
$23,877
$31,255
Annual Return
$3,134
$10,237
Salvage Value
$23,877
$31,255
32.75
AV
Recall that if Present Value = Salvage Value,
PV
For the incremental analysis the rate of return is Ai* = AAV - AV2 - AV1
PV2 - PV1
ΔΡ
Rate of Return = Ai'2 -1× 100
* Note: rate of return can be negative too.
Transcribed Image Text:What is the rate of return for the following incremental analysis. Investment 1 2 Initial Investment $23,877 $31,255 Annual Return $3,134 $10,237 Salvage Value $23,877 $31,255 32.75 AV Recall that if Present Value = Salvage Value, PV For the incremental analysis the rate of return is Ai* = AAV - AV2 - AV1 PV2 - PV1 ΔΡ Rate of Return = Ai'2 -1× 100 * Note: rate of return can be negative too.
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