Average Rate of ReturnThe following data are accumulated by Lone Peak Inc. in evaluating two competing capital investment proposals: 3D PrinterTruckAmount of investment$24,000 $52,000 Useful life4 years 9 years Estimated residual value0 0 Estimated total income over the useful life$3,360 $25,740 Determine the expected average rate of return for each proposal. If required, round your answers to one decimal place.3D Printer Truck

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evaluating two competing capital investment proposals:

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 3PB: Net present value method, present value index, and analysis for a service company First United Bank...

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Average Rate of Return

The following data are accumulated by Lone Peak Inc. in evaluating two competing capital investment proposals:

	3D Printer	Truck
Amount of investment	$24,000		$52,000
Useful life	4 years		9 years
Estimated residual value	0		0
Estimated total income over the useful life	$3,360		$25,740

Determine the expected average rate of return for each proposal. If required, round your answers to one decimal place.

3D Printer
Truck

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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