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PDA

Vill
Apr 1, 2009, 12:24 AM
Please Help
Calculate Accounting Rate of Return

This is the formula that I found-->average profit ÷ average investment

Cost: 1,000,000

Net Income:
Year 1: 150,000
Year 2: 200,000
Year 3: 300,000
Year 4: 450,000
Year 5: 500,000

is the answer 64%? (320,000/500,000)
That seems awfully high!!!

do we take into account depreciation (straight-line)?