Answer:
66.67%
Explanation:
Average investment = Initial investment/ Useful life = 36,000/ 5,000 = $7,200
The annual depreciation of the asset can be calculated as:
+) Annual depreciation = (Initial cost - Salvage value)/ Useful life
= ($36,000 - 0)/ 5 = $7,200
Annual net income from the asset is $12,000
+) Annual accounting income = Annual net income - Annual depreciation
= $12,000 - $7,200 = $4,800
The unadjusted rate of return on the asset can be calculated as following:
+) Unadjusted rate of return = Annual accounting income/ Average investment × 100%
= [tex]\frac{4,800}{7,200}[/tex]× 100% = 66.67%
