Answer:
B
Explanation:
Depreciation is the uniform decrease in the value of an asset over a period until the salvage value is reached.
It is given by :
Annual depreciation expense = (cost of asset - salvage)÷ useful life of the asset
Therefore the accumulated depreciation would not equal the original cost of the asset at the end of its estimated useful life because the salvage value will be deducted from cost of asset under declining-Balance.
Expected rate of return Probabilities
Booming 22% 5%
Normal 15% 92%
Recession 2% 3%
The expected rate of return on this stock is solved by multiply each expected rate of return to its corresponding probability and getting the sum of all products.
Booming: 0.22 x 0.05 = 0.011
Normal: 0.15 x 0.92 = 0.138
Recession 0.02 x 0.03 =<u> 0.0006</u>
Sum total 0.1496 or 14.96% is the expected rate of return on this stock
