The amount of the estimated average income for a proposed investment of $90,000 in a fixed asset, giving effect to depreciation (straight-line method), with a useful life of four years, no residual value, and an expected total income yield of $21,600, is:

Question

Quizplus · Accepted Answer

To calculate the average income, we need to find the annual income.

Total Depreciation = Cost of asset / useful life = $90,000 / 4 = $22,500 per year

Total Income before Depreciation = Expected total income yield + Total Depreciation 
= $21,600 + $22,500 = $44,100

Annual Income = Total Income before Depreciation / useful life = $44,100 / 4 = $11,025

Therefore, the estimated average income for the proposed investment is $5,400 (calculated as 50% of annual income, to give effect to depreciation using the straight-line method).

The Amount of the Estimated Average Income for a Proposed