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Sergio039 [100]
3 years ago
5

The expected average rate of return for a proposed investment of $636,800 in a fixed asset with a useful life of 4 years, straig

ht-line depreciation, no residual value, and an expected total net income of $191,560 for the 4 years is (round to two decimal points)
Business
1 answer:
Natali5045456 [20]3 years ago
4 0

Answer: 15.96

Explanation:

The expected rate of return will be the Average income divided by the average cost.

It is stated that the asset has a useful life of 4 years with no residual value so at the end of 4 years it will be worth $0.

The Average Cost/ Value of the Asset is calculated as;

= (Beginning Asset value - Ending Asset Value) / 2

= (600,000 - 0) /2

= 300,000

Total Income of $191,560 for the 4 years so Average income will be,

= 191,560/4

= $47,890

Expected Average Rate of Return = 47,890/300,000

= 15.96%

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