The expected average rate of return for a proposed investment of $600,000 in a fixed asset, with a useful life of four years, straight-line depreciation, no residual value, and an expected total net income of $240,000 for the 4 years, is:

Question

Quizplus · Accepted Answer

The average annual net income is $240,000 / 4 = $60,000. The average investment is $600,000 / 2 = $300,000. The average rate of return is $60,000 / $300,000 = 20%.

The Expected Average Rate of Return for a Proposed Investment