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 $500,000 for the 5 years.The expected average rate of return is 50%.

Question

Quizplus · Accepted Answer

The expected average rate of return cannot be 50% as it would result in a total net income of $800,000 (50% of $400,000). However, the total net income is expected to be $500,000. Therefore, the anticipated average rate of return is lower than 50%, making the statement false.

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