Chapter 25, Problem 25.1APR

1. (a)

To determine

Average Rate of Return:

Average rate of return is a method that measures the average earnings of a particular business, as a percentage of the average investment. It is also known as accounting rate of return.

Calculation of Average rate of return:

$\text{Average}\text{Rate}\text{of}\text{Return}\}\text{=}\frac{\left(\text{Estimated}\text{Average}\text{Annual}\text{Income}\right)}{\left(\text{Average}\text{Investment}\right)}\text{}\times 100$

The average rate of return for each project.

2.

To determine

To prepare: The report the merits of the two investments to the capital investment committee.