Answer: 14%
Explanation:
To calculate the Annual Rate of Return on such a project, you divide the Average net profit that the project is expected to make by the Average investment value.
This in effect compares future income to the investment in the project and so is a very useful tool in analysis.
Annual Rate of Return = Average Net Profit / Average Investment
Average Net Profit.
A new salon will normally generate annual revenues of $64,160, with annual expenses (including depreciation) of $40,500.
The net profit is revenue less expenses so,
= 64,160 - 40,500
= $23,660
Average Investment
The Average Investment is calculated by taking the average of the Initial Value of the project and it's ending value.
Initial value is $262,000 as that was the cost.
The Ending Value is the salvage value of $76,000.
= (262,000 + 76,000) / 2
= $169,000
The Annual Rate of Return is,
= 23,660 / 169,000
= 0.14
= <u>14%</u>
Answer:
Nominal interest rate (i)= expected inflation rate (f) + real interest rate (r)
i= 5+r
Explanation:
The Fisher Effect is an economic theory created by economist Irving Fisher that describes the relationship between inflation and both real and nominal interest rates.
The Fisher Effect states that the real interest rate equals the nominal interest rate minus the expected inflation rate.
The Fisher Effect can be seen each time you go to the bank; the interest rate an investor has on a savings account is really the nominal interest rate.
Answer:
The answer will no D .All of the above .
