The Expected Average Rate of Return for a Proposed Investment

question 54

Multiple Choice

The expected average rate of return for a proposed investment of $500,000 in a fixed asset, with a useful life of four years, straight-line depreciation, no residual value, and an expected total net income of $240,000 for the 4 years, is:

• A) 18%
• B) 48%
• C) 24%
• D) 12%

---

Definitions:

Indirect Materials

Materials used in the production process, but cannot be directly associated with a specific product.

Finished Product

A good that has completed the manufacturing process and is ready for sale to customers.

Production Process

Refers to the method or sequence of operations involved in the production of a good or service.

Prime Costs

The combined costs of direct materials and direct labor, which are directly attributable to the production of goods.