The expected average rate of return for a proposed investment of $540,000 in a fixed asset,with a useful life of four years,straight-line depreciation,no residual value,and an expected total net income of $216,000 for the 4 years,is

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The average rate of return is calculated by dividing the average annual net income by the initial investment. The total net income is $216,000 over 4 years, so the average annual net income is $54,000. The average rate of return is ($54,000 / $540,000) * 100% = 10%.

The Expected Average Rate of Return for a Proposed Investment