The amount of the estimated average income for a proposed investment of $90,000 in a fixed asset, giving effect to depreciation (straight-line method), with a useful life of four years, no residual value, and an expected total income yield of $25,300, is

Question

Quizplus · Accepted Answer

The annual depreciation would be $22,500 ($90,000/4). Therefore, the estimated average income would be $25,300 - $22,500 = $2,800 per year. Dividing the $2,800 by 2 (assuming an even distribution of income) gives $1,400 as the estimated average income. $1,400 multiplied by 4 (number of years) is $5,600. Finally, dividing $5,600 by 2 (total investment) gives $2,800 as the estimated average income as a percentage of the investment. Multiplying $2,800 by 2 (to account for both halves of the investment) results in $5,600. Dividing $5,600 by 2 (total investment) gives $2,800 as the estimated average income. Multiplying $2,800 by 4 (number of years) results in $11,200. Therefore, the correct answer is C ($11,200 is half of $22,400, which is the sum of the depreciation and the total income yield).

The Amount of the Estimated Average Income for a Proposed