Question

The expected average rate of return for a proposed investment of $500,000 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: Group of answer choices 18% 48% 24% 12%

Answer 1

Answer: 48%

Explanation:

Based on the information given, the average rate of return will be:

= (Average return) / (Average Investment) x 100

where, average return will be:

= ($240000 × 4)/4

= $240000

Then, annual averay rate of return will be:

= $240000/$500000 × 100

= 48%