The anticipated purchase of a fixed asset for $400,000, with a useful life of 5 years and no residual value, is expected to yield total net income of $300,000 over the 5 years. The expected average rate of return is 30%.

Question

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The expected average rate of return is calculated as (Total net income / Initial investment) * 100%. In this case, the expected average rate of return is (300,000 / 400,000) * 100% = 75%, which is greater than the required rate of return of 30%.

The Anticipated Purchase of a Fixed Asset for $400,000, with a Useful