A company is considering investing in three projects A, B and C with initial investment of $1,200 and a life of 5 years. The following table indicates the profits that are estimated from each project: After Tax & Depreciation Profits Year Project A Project B Project C 1 300 300 450 2 300 200 450 3 300 400 350 4 300 350 100 5 300 350 100 Total 1,500 1,600 1,450 Required: Calculate the Accounting Rate of Return on initial capital for project C. Calculate the Accounting Rate of Return on initial capital for project B. Calculate the Accounting Rate of Return on average capital for each project A
A company is considering investing in three projects A, B and C with initial investment of $1,200 and a life of 5 years. The following table indicates the profits that are estimated from each project: After Tax & Depreciation Profits Year Project A Project B Project C 1 300 300 450 2 300 200 450 3 300 400 350 4 300 350 100 5 300 350 100 Total 1,500 1,600 1,450 Required: Calculate the Accounting Rate of Return on initial capital for project C. Calculate the Accounting Rate of Return on initial capital for project B. Calculate the Accounting Rate of Return on average capital for each project A
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 22E
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A company is considering investing in three projects A, B and C with initial investment of $1,200 and a life of 5 years. The following table indicates the profits that are estimated from each project:
After Tax &
|
Year |
Project A |
Project B |
Project C |
|
1 |
300 |
300 |
450 |
|
2 |
300 |
200 |
450 |
|
3 |
300 |
400 |
350 |
|
4 |
300 |
350 |
100 |
|
5 |
300 |
350 |
100 |
|
Total |
1,500 |
1,600 |
1,450 |
Required:
- Calculate the Accounting
Rate of Return on initial capital for project C. - Calculate the Accounting Rate of Return on initial capital for project B.
- Calculate the Accounting Rate of Return on average capital for each project A
- Calculate the Accounting Rate of Return on average capital for each project C
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