The Expected Average Rate of Return for a Proposed Investment

question 81

Multiple Choice

The expected average rate of return for a proposed investment of $800,000 in a fixed asset with a useful life of 4 years, straight-line depreciation, no residual value, and an expected total income of $360,000 for the 4 years is

• A)45%
• B)22.5%
• C)11.3%
• D)5.5%

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Definitions:

Income

The money received, especially on a regular basis, for work, through investments, or from benefits.

Utility Function

A mathematical representation that ranks an individual's preferences for various combinations of goods and services based on the level of satisfaction (utility) they provide.

Chocolate Factory

A production facility dedicated to the manufacturing of chocolate products from raw cocoa beans and other ingredients.

Flood

An overflow of water that submerges land that is usually dry, often caused by heavy rain, melting snow, or dam breach.