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Average Rate of Return The following data are accumulated by Lone Peak Inc. in evaluating two...

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 %

Solutions

Expert Solution

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%

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