pter 9 Homework 70/80 Points 87.50 % Question 3 (of 8) Award: 0 out of 10.00 poi

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pter 9 Homework 70/80 Points 87.50 % Question 3 (of 8) Award: 0 out of 10.00 points You're trying to determine whether to expand your business by building a new plant has an installation cost of $12.5 million, which will be depreciated straight-line to zero year life. If the plant has projected net income of $1,904,300, $1,957,600, $1,926,000, and $1,379,500 over these four years, what is the project's average accounting return (AAR)? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g 32.16.) manufacturing plant. The Average accounting return 14.33 % References Learning Objective: 09-04 A them Difficulty: Basic Worksheet

Explanation / Answer

Average net income =( $1,904,300 + $1,957,600 + $1,926,000 +

$1,379,500 )/4

= $1,791,850

Average book value = opening book value + closing book value /2

= $12,5 00,000 + 0 /2

= $6,250,000

AAR = $1,791,850 / $6,250,000

= 28.87 %

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