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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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.

 

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Step 1

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

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