The Expected Average Rate of Return for a Proposed Investment

question 159

Multiple Choice

The expected average rate of return for a proposed investment of $8,000,000 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 $12,000,000 is:

• A) 15%
• B) 12%
• C) 40%
• D) 7.5%

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Definitions:

Liquidated

Refers to the process of settling debts by selling off assets.

Liquidation

The procedure of concluding a company's operations and allocating its resources among those who have claims.

Conservatism

An accounting principle that requires potential expenses and liabilities to be recognized immediately, but revenue only when it is ensured.