Answers
ARR = (Average Profit per year / Average investment) × 100
Average profit per year = (Sale price – Cost per unit) × Number of units per year
= (319 – 298.60) × 4,100
= $20.40 × 4,100
= $83,640
Average investment = (Cost + Residual value) / 2
= (457,600 + 34,400) / 2
= 492,000 / 2
= $246,000
ARR = (83,640 / 246,000) × 100
= 34% (Answer)
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