Question

Sean, a new graduate at a telecommunications firm, faces the following problem his first day at the firm: What is the average rate of return for a project that costs $200,000 to implement and has an average annual profit of $30,000

Answer 1

Answer:

The average return of the project is 15%

paybakc 6.67 years

Explanation:

Sean should divide the anual profit over the project cost ot get the average return

$\frac{income}{investment} = rate of return$

30,000 / 200,000 = 0.15

0.15 = 15%

Sean may also want to know the payback period:

so we do investment / income:

200,000 / 30,000 = 6.67

The firm will recover the cost of 200,000 after 6.67 years