The following data are supplied relating to two investment projects, only one of which may be selected:

Project A (N$) | Project B (N$) | |

Initial capital expenditure | 50 000 | 50 000 |

Profit (loss) year 1 | 25 000 | 10 000 |

2 | 20 000 | 10 000 |

3 | 15 000 | 14 000 |

4 | 10 000 | 26 000 |

Estimated resale value at end of year 4 | 10 000 | 10 000 |

Notes:

- Depreciation is accounted for on a straight-line method basis
- The cost of capital is ten percent

- Determine the average annual rate of return on average capital invested for project A to the nearest whole number
- Determine the average annual profit for project B
- Determine the average capital invested

## 1 Answer