In the text the formula for average capital is (Initial Investment + Scrap value)/2. However, whenever we are calculating averages say average cash flows or average sales, then we add the cash flows or sales for all the years and divide it by the number of years. So many students have a doubt as to why the formula for average capital is different from the usual method of calculating the averages. Hence, I have just elaborated and said that we would get the very same answer even if we adopt the formula of average capital as Capital for all years divided by number of years. The said 3600 is just the total of capitals for all years. Honestly you do not need to be bothered about this formula as you could use the simple formula of average capital = (Initial investment + scrap value)/2
