At the start of the year,your firm's capital stock equaled $10 million,and at the end of the year it equaled $15 million.The average depreciation rate on your capital stock is 20%.Net investment during the year equaled

Question

Quizplus · Accepted Answer

The change in capital stock from the start to the end of the year is:
$15 million - $10 million = $5 million

We know that the average depreciation rate on the capital stock is 20%, so the depreciation expense for the year would be:
20% x $10 million = $2 million

Net investment would then be the change in capital stock minus depreciation expense:
$5 million - $2 million = $3 million

Therefore, the correct answer is C) $5 million.

At the Start of the Year,your Firm's Capital Stock Equaled