The anticipated purchase of a fixed asset for $400,000, with a useful life of 5 years and no residual value, is expected to yield total net income of $300,000 over the 5 years. The expected average rate of return is 37.5%.

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Catherine Giron · Accepted Answer

Final Answer : False, Explanation :  The expected average rate of return is calculated as (Annual Net Income / Initial Investment) * 100. With a total net income of $300,000 over 5 years, the annual net income is $60,000. Therefore, the expected average rate of return is ($60,000 / $400,000) * 100 = 15%.

The anticipated purchase of a fixed asset for $400,000, with a useful life of 5 years and no residual value, is expected to yield total net income of $300,000 over the 5 years. The expected average rate of return is 37.5%.

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