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Forums › ACCA Forums › ACCA FM Financial Management Forums › Q4. Average Investment query

- This topic has 3 replies, 4 voices, and was last updated 13 years ago by kachaloo.

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- AuthorPosts
- December 7, 2010 at 4:53 am #46710
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

December 7, 2010 at 8:42 am #72990AnonymousInactive- Topics: 0
- Replies: 44
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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

December 7, 2010 at 11:22 am #72991You 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.

December 7, 2010 at 12:58 pm #72992because it is

Investment PLUS residual Value therefore TWO elements hence you get average DIVIDED by 2

think basic maths 🙂 - AuthorPosts

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