Question

Suppose that new computer software for accounting and analysis at a business has a useful life of only one year and costs $200,000 before it needs to be upgraded to a new version. The revenue generated by this software is expected to be $250,000. The expected rate of return from this new computer software is:___________.

Answer 1

Answer: 25%.

Explanation:

Expected Rate of return is calculated by first finding the difference between the Revenue Expected and the Cost.

Once this figure is ascertained, you divide it by the Cost.

In this case that would be

$250,000 - $200,000 = $50,000.

50,000/200,000 = 0.25

= 25%.