The Expected Average Rate of Return for a Proposed Investment

question 129

Multiple Choice

The expected average rate of return for a proposed investment of $4,800,000 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 $10,560,000 over the 20 years is

• A) 24%
• B) 22%
• C) 45%
• D) 10%

---

Definitions:

Operating Cash Flows

Cash generated from the primary activities of a business, including revenue from sales of goods and services.

Presentation Method

The way financial information is displayed and organized in financial statements or reports.

Financing Activities

Activities that result in changes in the size and composition of the contributed equity and borrowings of the entity.

Statement of Cash Flows

A financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, breaking the analysis down to operating, investing, and financing activities.