Average Rate of Return Determine the average rate of return

Average Rate of Return Determine the average rate of return for a project that is estimated to yield total income of $439,200 over six years, has a cost of $629,500, and has a $102,500 residual value. Round to the nearest whole number.

Solution

Cost = Investment - Residual value = $629,500 - $102,500 = $527,000

Income = $439,200

Average rate of return = $439,200/$527,000

=83.34%