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I know it’s probably really obvious but I cannot remember why we divide the Average Investment by 2 in the following:
Initial Investment 350
Plus: Residual Value 0
Total Investment 350
Average Investment /2 175ARR = 79.14/175×100 = 45%
I’ve seen this before in other questions but I cannot remember why for the life of me!
Em
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when calculation this thing …to get the average
it is = (cost – Resdual value)/2
the 2 there is call the constant figure…..
meaning you compared two figures (cost and residual value)
That is my understanding ….. any help with this
You don’t divide the average investment by 2. You divide the sum of the starting and ending investments by 2 to get the average. it’s basic grade school math.
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