on 1)
Click the Avg Operating Income tab and answer the questions related to the project under consideration by completing the cells shaded in pink. Once you have calculated the average annual net cash inflow, click on the Actg Rate of Return tab and repeat the process.
2)
Incorrect answers will appear in RED
2181ba6ecee52b74421cec8119423d1ea732f346.xls
Sikes Hardware Average annual operating income
Year 1 - net cash inflow Year 2 - Net cash inflow Years 3-10 net cash inflows Total net cash inflows over life Less: Depreciation over life Total operating income life over Divided by years of life Average annual operating income $ $ $ $ $ $ $ 310,000 280,000 1,920,000 2,510,000 (1,454,000) 1,056,000 10 105,600
Congratulations, you have correctly calculated the average annual net operating income!
Kathleen R. O'Donnell
2181ba6ecee52b74421cec8119423d1ea732f346.xls Actg Rate of Return
Accounting Rate of Return
Average Annual Operating Income Average Amount Invested in Asset
$105,600 $727,000 14.53%
Accounting Rate of Return =
You have successfully calculated the Accounting Rate of Return
Kathleen R. O'Donnell