Answer:
3 years
The average rate of return method includes the entire amount of the income earned over the life of the proposal.
a. rate of return on investments
b. may be reconsidered if funds later become available.
Explanation:
Cash payback period measures how long it takes to recover the amount invested in a project from the cumulative cash flow.
Amount invested = $-1,000,000
Amount recovered in year 1 = $-1,000,000 + $400,000 = $-600,000
Amount recovered in year 2 = $-600,000 + 320,00 = $-280,000
Amount recovered in year 3 = $-280,000 + 280,000 = 0
The amount invested is recovered In the 3 year
Average accounting rate = average net income/ average book value
Net present value is the present value of after tax cash flows from an investment less the amount invested. The interest rate used is the rate of return on investments.
The hurdle rate is the least acceptable rate that a project can have for it to be acceptable.
I hope my answer helps you
