You’re trying to determine whether to expand your business by building a new man
ID: 2709425 • Letter: Y
Question
You’re trying to determine whether to expand your business by building a new manufacturing plant. The plant has an installation cost of $11.8 million, which will be depreciated straight-line to zero over its four-year life. If the plant has projected net income of $1,834,300, $1,887,600, $1,856,000, and $1,309,500 over these four years, what is the project’s average accounting return (AAR)? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
You’re trying to determine whether to expand your business by building a new manufacturing plant. The plant has an installation cost of $11.8 million, which will be depreciated straight-line to zero over its four-year life. If the plant has projected net income of $1,834,300, $1,887,600, $1,856,000, and $1,309,500 over these four years, what is the project’s average accounting return (AAR)? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Explanation / Answer
Average accounting return:
= [($1,834,300+$1,887,600+$1,856,000+$1,309,500)÷4]÷$11.8 million
= 14.59%
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.