Determine the average rate of return for a project that is e

Determine the average rate of return for a project that is estimated to yield total income of $340,800 over three years, has a cost of $610,600, and has a $99,400 residual value. Round to the nearest whole number. %

Solution

Estimated average annual income = $340,800 / 3 years = $113,600

Average investment = ($610,600 + $99,400) / 2 = $355,000

Average rate of return = $113,600 / $355,000 = 32%