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 for the 5 years. The expected average rate of return is 30%.

Question

Quizplus · Accepted Answer

The expected average rate of return can be calculated as (Total net income / Initial investment) x 100. Substituting the given values, we get (300,000 / 400,000) x 100 = 75%. Therefore, the statement that the expected average rate of return is 30% is false.

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