Home l Welcome \' USC Aiken myuscaedu Exam #4 (Chapter 8) Chegg Study I Guided S

Question

Home l Welcome ' USC Aiken myuscaedu Exam #4 (Chapter 8) Chegg Study I Guided Solutio + x ezto.mheducation.com/hm.tpx 090% | asearch Most Visited Getting Started MyUSC Aiken - Black.The True Story of Poca E conect BADM 363 Business Finance: Fall 2017 (ALL SECTIONS) Crystal Seller FINANCE Exam 4 (Chaptes 8) instructions I help Quesuon 2 (or 30 Time remaining: 2:59.05 2. You're trying to dsetermine whether ox not to expand your business by buiding a new manufacturing plant. The plant has an nsitallation cost of $17.4 millon, which will be deprecasted straight- ine lo zero over ts four year lte If the plant has projected net income of $1,755,000, $2,115.,000,51,974,000, and $1,296,000 over these four years, what is the prcject's average accouniting retun (HAR? (Do not round intermediate calculations and enter youra Average accounting relurn

Explanation / Answer

AAR = average net income / average book value.

Average net income = sum of all projected net income / number of years
                                    = ($1,755,000 + 2,115,000 + 1,974,000 + 1,296,000) / 4
                                   = $1,785,000

Average book value = (value of asset + residual value) / 2
                                  = ($17,400,000 + 0) / 2
Average book value = $8,700,000

AAR = Average net income / Average book value
AAR = $1,785,000 / $8,700,000
AAR = .2051, or 20.51%

Thus, AAR = 20.51%

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.