The following data are accumulated by Patterson Inc. in evaluating two competing capital investment proposals: Line Item Description Project C Project T Amount of investment $84,000 $96,000 Useful life 4 years 5 years Estimated residual value 0 0 Estimated total income over the useful life $6,720 $15,600 Determine the expected average rate of return for each project. Round your answers to one decimal place. Line Item Description Percentages Project C fill in the blank 1% Project T fill in the blank 2%

The following data are accumulated by Patterson Inc. in evaluating two competing capital investment proposals: Line Item Description Project C Project T Amount of investment $84,000 $96,000 Useful life 4 years 5 years Estimated residual value 0 0 Estimated total income over the useful life $6,720 $15,600 Determine the expected average rate of return for each project. Round your answers to one decimal place. Line Item Description Percentages Project C fill in the blank 1% Project T fill in the blank 2%

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A: Step 1:

Question

The following data are accumulated by Patterson Inc. in evaluating two competing capital investment proposals:

Line Item Description	Project C	Project T
Amount of investment	$84,000	$96,000
Useful life	4 years	5 years
Estimated residual value	0	0
Estimated total income over the useful life	$6,720	$15,600

Determine the expected average rate of return for each project. Round your answers to one decimal place.

Line Item Description	Percentages
Project C	fill in the blank 1%
Project T	fill in the blank 2%

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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