If hold period cash flows are 15,000; net sale proceeds 30,000; initial investment 20,000, what is the ROI?

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Multiple Choice

If hold period cash flows are 15,000; net sale proceeds 30,000; initial investment 20,000, what is the ROI?

Explanation:
ROI measures how much profit you earn per dollar invested. Here, you receive 15,000 in cash flows during the hold period and 30,000 from selling the asset, for a total return of 45,000. Subtract the initial investment of 20,000 to get a profit of 25,000. Divide that profit by the initial investment: 25,000 / 20,000 = 1.25, which is 125%. So the investment yields a 125% ROI. If you only looked at the cash flow during the hold period, you’d get 75%, but including the sale proceeds increases the return to 125%.

ROI measures how much profit you earn per dollar invested. Here, you receive 15,000 in cash flows during the hold period and 30,000 from selling the asset, for a total return of 45,000. Subtract the initial investment of 20,000 to get a profit of 25,000. Divide that profit by the initial investment: 25,000 / 20,000 = 1.25, which is 125%. So the investment yields a 125% ROI. If you only looked at the cash flow during the hold period, you’d get 75%, but including the sale proceeds increases the return to 125%.

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