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Average accounting return-The Patches Group has invested $27000 in a high-tech project lasting three years. Depreciation...

Average accounting return-The Patches Group has invested $27000 in a high-tech project lasting three years. Depreciation is $8100, $12400, and $6500 in year 1, 2, and 3 respectively. The project generates earnings before tax of $3340 each year. If the tax rate is 25%, what is the projects average accounting return (AAR)

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Expert Solution

Average accounting Income can be computed with following equation :

n = number of years.

And, Average accounting return return can be computed with following equation :

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

jeff jeffy answered 1 year ago
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