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2.     You're trying to determine whether or not to expand your business by building a new manufacturing

plant. The plant has an installation cost of $20.2 million, which will be depreciated straight-line to zero over its four-year life. If the plant has projected net income of $1,895,000; $2,185,000; $2,114,000 and $1,366,000 over these 4 years, what is the project's average accounting return (AAR)? Please use excel and explain conclusion. 

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Ans ] Average Accounting return of the new project is 9.36% . If the AAR is more than the required return ,... View the full answer

Average Accounting return.jpg

Average Accounting Return
Initial Investment
2,02,00,000.00
Total Net
Income=1895000+2185000+2114000+1366000
75,60,000.00
Total No of Years
4
Average Net Income=Total Net Income/No of
Years...

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