A company is considering investing in three projects 1, 2 and 3 with initial investments of $1,800,000, $2,000,000 and $2,200,000 respectively. Each project is expected to have a life of five (5) years. The profits generated by the projects are as follows: After tax and depreciation profits Year Project 1 Project 2 Project 3 $ $ $ 1 440,000 400,000 700,000 2 440,000 600,000 600,000 3 440,000 300,000 500,000 4 440,000 500,000 400,000 5 440,000 700,000 600,000 Total 2,200,000 2,500,000 2,800,000 Required: Calculate: (a) the average profits for each project (b) the average capital for each project (c) the accounting rate of return (ARR) on initial capital the accounting rate of return (ARR) on average capital.

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