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A project has a first cost of $120,000 and an estimated salvage valu

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A project has a first cost of $120,000 and an estimated
salvage value after 25 years of $20,000. Estimated
average annual receipts are $25,900; estimated average
annual disbursement are $15,060. Assuming that annual
receipts and disbursements will be uniform, compute the
prospective rate of return
please show work
Solution
Average annual income = ( receipts disbursement ) +
average annual salvage value
= (25,900 -15,060) +
20,000/25
=10840 +800
= $11,640
Rate of return = average annual income/ initial investment
= $11640/ 120,000
=9.70%

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A project has a first cost of $120,000 and an estimated salvage value after 25 years of $20,000. Estimated average annual receipts are $25,900; estimated average annual disbursement are $15,060. Assuming that annual receipts and disbursements will be uniform, compute the prospective rate of return p ...
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