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