Determine the average rate of return for a project that is estimated to yield total income of $36,000 over three years, has a cost of $70,000

Determine the average rate of return for a project that is estimated to yield total income of $36,000 over three years, has a cost of $70,000, and has a $10,000 residual value.

Answer:
Estimate average annual income $12,000
($36,000 ÷ 3 years)

Average investment $40,000
[($70,000 + $10,000) ÷ 2]

Average rate of return 30%
($12,000 ÷ $40,000)




A project has estimated annual net cash flows of $9,300. It is estimated to cost $41,850. Determine the cash payback period. Round to one decimal place.

Answer:
4.5 years ($41,850 ÷ $9,300)



A project has estimated annual net cash flows of $135,800. It is estimated to cost $787,640. Determine the cash payback period. Round to one decimal place.

Answer:
5.8 years ($787,640 ÷ $135,800)