BUSINESS HIGH SCHOOL

A project requires an investment of Rs 5,00,000 and has a scrapvalue of Rs. 20,000 after five years. It is expected to yield profits after depreciation and taxes during the five years amounting to Rs 40,000, Rs. 60,000, Rs 70,000, Rs 50,000 and Rs 20,000. Calculate the average rate of return on the investment;​

Answers

Answer 1
Answer:

Investment in Project = Rs. 5,00,000

Scrap Value after 5 years = 20,000

To Find: Average rate of return on the investment

Solution:

Total Profit = Rs 40,000, + Rs. 60,000 + Rs 70,000 + Rs 50,000 + Rs 20,000

= Rs. 2,40,000

Average Profit =240000/5

=rs 48000

Net investment in project = 5,00,000 - 20,000

= Rs. 4,80,000

Average Rate of Return = (average annual profit ÷net investment in project)*100

=(48000÷480000)*100

=10%
Answer 2
Answer:

Final answer:

The average rate of return on the investment is 48%.

Explanation:

To calculate the average rate of return on the investment, we need to sum up the profits generated during the five years and divide it by the initial investment.

Profits after depreciation and taxes during the five years: Rs 40,000, Rs. 60,000, Rs 70,000, Rs 50,000, and Rs 20,000.

Total profits = Rs 40,000 + Rs 60,000 + Rs 70,000 + Rs 50,000 + Rs 20,000 = Rs 2,40,000

Average rate of return = (Total profits / Initial investment) * 100

Average rate of return = (Rs 2,40,000 / Rs 5,00,000) * 100 = 48%

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Final answer:

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