Question

A project has an average book value of $22,000 and a four year life. The projected net income from the project is $1,500, $1,800, $1,900, and $2,000 a year for the next four years, respectively. What is the average accounting return?

a 4.09 percent

b 6.82 percent

c 8.18 percent

d 8.64 percent

e 9.09 percent

Answer 1

Average accounting retun on $22000 average asset is 8.18%

Formulas:

Average Book Value of asset	22000
	0	1	2	3	4
Net income		1500	1800	1900	2000
Yearly accounting return on asset		=C5/$B$2	=D5/$B$2	=E5/$B$2	=F5/$B$2
Average accounting retunr	=AVERAGE(C6:F6)