Q4. Average Investment query — OpenTuition Forums

Eemmachiswell15y ago

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 /2 175

ARR = 79.14/175x100 = 45%

I've seen this before in other questions but I cannot remember why for the life of me!

Em

Former user15y ago#1

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

Bbridmw15y ago#2

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.

Kkachaloo15y ago#3

because it is
Investment PLUS residual Value therefore TWO elements hence you get average DIVIDED by 2
think basic maths :)

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