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%

Question

Addyson Hardin

Business

15 August, 18:22

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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Hoffman · Answer 1

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%.