Respuesta :
The simple rate of return on the project is 32% if the cost investment is $85,000 and the annual income earned on it is $27,200.
What is annual income?
Annual income is the amount of gain earned by a company from the investment made in a long-term project. It can be determined from the income statement of a company.
Given values:
Annual income : $27,200
Initial investment : $85,000
Computation of simple rate of return on investment:
[tex]\rm\ Simple \rm\ rate \rm\ of \rm\ return =\frac{\rm\ Annual \rm\ incremental \rm\ income}{\rm\ Initial \rm\ Investment} \\\rm\ Simple \rm\ rate \rm\ of \rm\ return=\frac{\$27,200}{\$85,000} \\\rm\ Simple \rm\ rate \rm\ of \rm\ return=32\%[/tex]
Therefore, after making an initial investment of $85,000 into the project with an annual income of $27,200, the rate of return is earned at 32%.
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