You’re trying to determine whether to expand your business by building a new manufacturing plant. The plant has an installation cost of $15 million, which will be depreciated straight-line to zero over its four-year life. If the plant has projected net income of $1,754,000, $1,820,500, $1,716,300, and $1,097,400 over these four years, what is the project’s average accounting return (AAR)?
The calculated monthly payment on a loan amortized over five years is rounded up by 0.2 cents to get to the nearest cent.
a. Will the adjusted final payment be more than or less than the regular payment?
b. Will the difference between the regular and the final payment be (pick one):
(i) More than
(ii) Less than or
(iii) Equal to 0.2 cents × 60 = 12 cents? Explain.
