The expected rate of return on average investment of the machine is:

Question

Quizplus · Accepted Answer

The expected rate of return can be calculated using the formula: (total returns - total cost)/total cost * 100%. Plugging in the values, we have (55000-40000)/40000 * 100% = 37.5%. However, we need to take into account the salvage value of the machine at the end of its useful life. Subtracting the salvage value from the total cost, we have (55000-10000-40000)/40000 * 100% = 18.75%. Rounded to the nearest tenth, this is 18.6%. Therefore, the best choice is C.

The Expected Rate of Return on Average Investment of the Machine