Concept explainers
1. (a)
Average
Average rate of return is a method that measures the average earnings of a particular business, as a percentage of the average investment. It is also known as accounting rate of return.
To determine: The average rate of return for each project.
(b)
Net present value method is the method which is used to compare the initial
To determine: The net present value of each investment, using the present value of $1 table in Exhibit 2.
2.
To discuss: The merits of the two investments to the capital investment committee.
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Financial & Managerial Accounting
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