Problem:
You're trying to determine whether to expand your business by building a new manufacturing plant. The plant has an installation cost of $12.1 million, which will be depreciated straight-line to zero over its four-year life.
Required:
Question: If the plant has projected net income of $1,864,300, $1,917,600, $1,886,000, and $1,339,500 over these four years, what is the project's average accounting return (AAR)?
Note: Provide support for rationale.