A project requires ₹5,00,000 investment, gives ₹1,50,000 PAT and ₹50,000 depreciation per year for 4 years. Average Investment ARR (no salvage) is:
A30%
B40%
C75%
D60%
Answer & Solution
Correct answer: D. 60%
1. Average Investment = (5,00,000 + 0) / 2 = ₹2,50,000.
2. Avg Annual PAT = ₹1,50,000 (given).
3. ARR = 1,50,000 / 2,50,000 = 60%.
_Source: ICAI BoS CA Inter Paper 6A, Ch 7 "Investment Decisions", §6 — ARR_
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