The chart below shows the initial investment and expected yearly payback for Project A and Project B     Project A Project B Initial Investment  $      300,000  $      450,000 Expected Yearly PayBack  $        45,000  $        90,000   For Project A, There has been a change in the expected yearly payback. Years 1 and 2 – you are expecting $45,000 each year. For the next three years, you are expecting $70,000 each year. What would be the average ROI for this alternative?

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 21P
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The chart below shows the initial investment and expected yearly payback for Project A and Project B

 

 

Project A

Project B

Initial Investment

 $      300,000

 $      450,000

Expected Yearly PayBack

 $        45,000

 $        90,000

 

For Project A, There has been a change in the expected yearly payback.

Years 1 and 2 – you are expecting $45,000 each year.

For the next three years, you are expecting $70,000 each year.

What would be the average ROI for this alternative? 

Expert Solution
Step 1

A Small Introduction about Investment

 

  • A venture is basically a resource that is made fully intent on permitting cash to develop.
  • One, assuming that you put resources into a saleable resource, you might procure pay via benefit.
  • Second, in the event that Investment is made in a return for creating the plan, you will procure a pay by means of aggregation of gains.
  • The venture is the work of assets fully intent on getting a return on it. Overall terms, venture implies the utilization of cash in the expectation of getting more cash.
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