A potential project involves an initial investment in machinery of RO.1,000,000 and has the following cash inflows: Year 1 – RO.250,000 Year 2 – RO.350,000 Year 3 – RO.200,000 Year 4 – RO.400,000 At the end of year 4, the machinery will be sold for RO.600,000. Calculate the accounting rate of return based on average investment. NOTE (DEDUCT THE DEPRECIATION TO ARRIVE AT THE CORRECT AVERAGE PROFIT) a. None of the options b. 35% c. 20% d. 25% Clear my choice
A potential project involves an initial investment in machinery of RO.1,000,000 and has the following cash inflows: Year 1 – RO.250,000 Year 2 – RO.350,000 Year 3 – RO.200,000 Year 4 – RO.400,000 At the end of year 4, the machinery will be sold for RO.600,000. Calculate the accounting rate of return based on average investment. NOTE (DEDUCT THE DEPRECIATION TO ARRIVE AT THE CORRECT AVERAGE PROFIT) a. None of the options b. 35% c. 20% d. 25% Clear my choice
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 12P
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Question
A potential project involves an initial investment in machinery of RO.1,000,000 and has the following cash inflows:
Year 1 – RO.250,000
Year 2 – RO.350,000
Year 3 – RO.200,000
Year 4 – RO.400,000
At the end of year 4, the machinery will be sold for RO.600,000.
Calculate the accountingrate of return based on average investment.
NOTE (DEDUCT THEDEPRECIATION TO ARRIVE AT THE CORRECT AVERAGE PROFIT)
Year 1 – RO.250,000
Year 2 – RO.350,000
Year 3 – RO.200,000
Year 4 – RO.400,000
At the end of year 4, the machinery will be sold for RO.600,000.
Calculate the accounting
NOTE (DEDUCT THE
a.
None of the options
b.
35%
c.
20%
d.
25%
Clear my choice
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