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jok3333 [9.3K]
3 years ago
7

Buster Evans is considering investing $20,000 in a project with the following annual cash revenues and expenses: Cash Cash Reven

ues Expenses Year 1 $ 8,000 $ 8,000 Year 2 $12,000 $ 8,000 Year 3 $15,000 $ 9,000 Year 4 $20,000 $10,000 Year 5 $20,000 $10,000 Depreciation will be $4,000 per year. What is the accounting rate of return on the investment
Business
1 answer:
Lady bird [3.3K]3 years ago
6 0

Answer:

Accounting rate of return= 20%

Explanation:

<em>The accounting rate of return is the average annual income expressed as a percentage of the average investment.  </em>

<em>The simple rate of return can be calculated using the two formula below:  </em>

Accounting rate of return  

= Annual operating income/Average investment × 100  

Average investment = (Initial cost + scrap value)/2  

Average profit = Total profit over investment period / Number of years

Total revenue = 8000+12000+ 15000 + 20,000+ 20,000 = 75000

Total expenses= 8000 + 8000 + 9000 +10,000 + 10,000 = 45000

Cash profit = 75,000 - 45,000 = 30,000

Depreciation = 4000× 5 = 20,000

Accounting profit = Cash profit - Depreciation = 30,000- 20,000 = 10,000

Average profit = 10,000/5 = 2,000

Accounting rate of return = 2,000/20000× 100 = 20%

Accounting rate of return= 20%

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Explanation:

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3 years ago
You are an employee of University Investment Consultants, Ltd. and have been given the following assignment. You are to present
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Nicole is considering opening a Roth Individual Retirement Account. If she invests into the Roth IRA, determine the amount in th
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The future amount in the account (Roth IRA) is equal to: D. $180,488. 86.

<u>Given the following data:</u>

  • Principal = $4,291
  • Interest rate = 2.23%
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To determine the future amount in the account:

Mathematically, the compound interest for this Roth IRA is given by the formula:

A = \frac{P(1\;+\;r)^t -1}{r}

<u>Where:</u>

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  • t is the number of years.
  • A is the future amount.

Substituting the given parameters into the formula, we have;

A = \frac{4291(1\;+\;0.0223)^{30} -1}{0.0223}\\\\A = \frac{4291(1.0223)^{30} -1}{0.0223}\\\\A = \frac{4291(1.93798684094 -1}{0.0223}\\\\A = \frac{4291(0.93798684094)}{0.0223}\\\\A = \frac{4024.901534474}{0.0223}

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Answer:

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