Aproject has an initial cost of $27,000 and a three-year life. the company uses straight-line depreciation to a book value of zero over the life of the project. the projected net income from the project is $1,600, $2,200, and $1,700 a year for the next three years, respectively. what is the average accounting return? 6.79% 14.69% 10.14% 13.58% 7.35%

Average Accounting Return or Accounting Rate of Return

Formula: ARR = Average Profit/Average Investment

Given:

Initial Cost = $27000 (three year life)

Depreciation = 0

Projected Net Income for three years = $1600, $2200 and $1700

Solution:

ARR = [($1600+$2200+$1700)/3]/[($27000+0)/2]

ARR = ($5500/3)/($27000/2)

ARR = 0.135802 or 13.58%

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a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.