Vedanta Resources has invested 8 million in a new mining project lasting 3 years. Depreciation is charged

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Vedanta Resources has invested £8 million in a new mining project lasting 3 years. Depreciation is charged on a straight line basis to zero over the course of the project. The project generates pre-tax income of £2 million each year. The pretax income already includes the depreciation expense. If the tax rate is 23 per cent, what is the project’s average accounting return (AAR)?

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Corporate Finance

ISBN: 9780077173630

3rd Edition

Authors: David Hillier, Stephen A. Ross, Randolph W. Westerfield, Bradford D. Jordan, Jeffrey F. Jaffe

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