Question

Select the correct answer.
A company made a profit of $25,000 over a period of 5 years on an initial investment of $10,000. What is its annualized ROI?

Answer 1

Answer:

30%

Explanation:

Total profit=$25000

Initial investment=$10000

Return on investment is given by

RoI=(Gain from investment-cost of investment)/cost of investment

$RoI=\frac {25000-10000}{10000}\times 100=150%$

RoI=150% but since it's over 5 years, we distribute for 5 years hence annual $RoI=\frac {150}{5}=30%$

Therefore, RoI=30%