Answer:
The expected rate of return on this investment is:
21%
Explanation:
Cost of computer = $200,000
Annual cash flows for 5 years = $48,271
Total cash flows = $241,355 ($48,271 x 5)
Returns = $41,355 ($241,355 - $200,000)
The expected rate of return = Returns/Costs * 100
or the average of returns and the average of investments (they yield the same results)
Using the total returns and investment:
= $41,355/$200,000 * 100
= 21%
Using the average returns and investment:
= $8,271/$40,000 * 100
= 21%
