My question: What is the projects average accounting return (AAR)? ___________

PROVIDED INFORMATION:

Average Accounting Return=Average Net IncomeAverage Book Value

Average Net Income=1,293,000+1,725,000+1,548,000+131,0004=$1,469,000

Depreciation=10,800,0004=$2,700,000

Book Values:

Year 0 = $10,800,000

Year 1 = $10,800,000 $2,700,000 = $8,100,000

Year 2 = $8,100,000 $2,700,000 = $5,400,000

Year 3 = $5,400,000 $2,700,000 = $2,700,000

Year 4 = $2,700,000 $2,700,000 = $0

Average Book Value=10,800,000+8,100,000+5,400,000+2,700,000+05=$5,400,000

AAR=1,469,0005,400,000=0.2720 (27.20%)