The expected average rate of return for a proposed investment of $433,800 in a fixed asset...

The expected average rate of return for a proposed investment of $433,800 in a fixed asset with a useful life of 4 years, straight-line depreciation, no residual value, and an expected total income of $374,440 for the 4 years is (round to two decimal places)

a. 21.58%

b. 1.73%

c. 43.16%

d. 0.86%

Expert Solution

Answer)

Calculation of Average rate of return

Average rate of return = Average Net Income/ Initial investment

= (Total net Income/ Number of years)/ Initial investment

= ($ 374,440/4 years)/ $ 433,800

= $ 93,610/ $ 433,800

= 21.58%

Therefore average rate of return is 21.58% and the correct option in the given question is (a)

ekkarill92 answered 1 year ago

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