The anticipated purchase of a fixed asset for $400,000,with a useful life of 5 years and a $40,000 residual value,is expected to yield total net income of $200,000 for the 5 years.The expected average rate of return on investment is 18.2%.

Question

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The average rate of return on investment is calculated as (Total net income / Average investment) * 100%. In this case, the average investment is ($400,000 + $40,000) / 2 = $220,000. Therefore, the average rate of return on investment is ($200,000 / $220,000) * 100% = 18.2%.

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