The expected average rate of return for a proposed investment of $6,000,000 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 over the 20 years is a. 20% b. 10% c. 40% d. 5% the answe is A but how

The management of Nebraska Corporation is considering the purchase of a new machine costing $490,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability:

	Income from	Net Cash
Year	Operations	Flow
1	$100,000	$180,000
2	40,000	120,000
3	40,000	100,000
4	10,000	90,000
5	10,000	120,000

1.The cash payback period for this investment is

5 years

4 years

2 years

3 years

ANSWER: b

The average rate of return for this investment is

a. 18%

b. 16%

c. 58%

d. 10%

ANSWER: b but how