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1 March, 15:45

The expected average rate of return for a proposed investment of $4,800,000 in a fixed asset, using straight-line depreciation, with a useful life of 20 years, no residual value, and an expected total net income of $10,560,000 over the 20 years is a. 24% b. 10% c. 22% d. 45%

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  1. 1 March, 18:53
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    d. 45%

    Explanation:

    Proposed investment in fixed asset = $4,800,000

    Total net income = $10,560,000

    Over the same period (20 years)

    The expected average rate of return

    = Proposed investment/Total net income

    = $4,800,000/$10,560,000

    =0.454545

    ≈ 45%

    The right option is d. 45%.
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