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5 May, 01:44

The expected average rate of return for a proposed investment of $800,000 in a fixed asset with a useful life of four years, straight-line depreciation, no residual value, and an expected total net income of $360,000 for the four years is

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  1. 5 May, 02:13
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    22.5%

    Explanation:

    For computation of return on investment first we need to find out the average investment and average income per year which is shown below:-

    Average investment = Proposed investment : Average

    = $800,000 : 2

    = $400,000

    Now, the Average income per year = Expected total net income : Number of year

    = $360,000 : 4

    = $90,000

    Return on investment = Average income per year : Average investment

    = $90,000 : $400,000

    = 0.225

    or

    = 22.5%
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