In: Accounting
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 | $48,000 | |||
Useful life | 4 years | 7 years | |||
Estimated residual value | 0 | 0 | |||
Estimated total income over the useful life | $1,920 | $13,440 |
Determine the expected average rate of return for each proposal. If required, round your answers to one decimal place.
3D Printer | % |
Truck | % |
Expected Annual Rate of Return = | Expected Annual Earning | |
Initial Investment | ||
3D Printer | Truck | |
Average Estimated Total Income | 1,920 | 13,440 |
Initial Investment | 24,000 | 48,000 |
Expected Annual Rate of Return | 8.0% | 28.0% |