Question

The expected average rate of return for a proposed investment of $5,190,000 in a fixed asset, using straight-line depreciation, with a useful life of 20 years, no residual value, and an expected total net income of $15,570,000 over the 20 years is (round to two decimal points).

Answer 1

15%

Step-by-step explanation:

Average rate of return = average net income / amount invested

average net income = $15,570,000 / 20 = $778,500

Amount invested = $5,190,000

$778,500 $5,190,000 = 0.15 = 15%