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


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 $17 million, which will be depreciated straight-line to zero over its four-year life.





Required:




If the plant has projected net income of $1,735,000, $2,105,000, $1,954,000, and $1,286,000 over these four years, what is the project’s average accounting return (AAR)? (Do not include the percent sign (%). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

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Dear student one can also take Actual investment to... View the full answer

aar.xlsx

Solution
Cost of Installation
Life =
Salvage Value =
Depreciation = $17,000,000.00
4 years
Nil
$4,250,000.00 Year 1
Year 2
Year 3
Year 4
$1,735,000.00
$2,105,000.00
$1,954,000.00
$1,286,000.00...

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