Question

Saeed needs money to purchase tools, basic office supplies, parts to refurbish equipment, accounting software, and legal help fees. Believing Saeed's business will be a success, an investor invests $5,000 to help Saeed open his business. In return, Saeed agrees to repay the investor the $5,000 plus 17 percent of the profits of the business. Calculate the return on investment for the investor if Saeed's business makes $7,000 in profit as a total return of the business in its first year.

Answer 1

The return of investment for the investor if Saeed's business makes $7000 in profit in its first year is $6190.

Step-by-step explanation:

Saeed agrees to repay the investor the $5000 plus 17 percent of the profits of the business. This can be represented by this equation.

Return of investment for the investor= initial investment+ (percentage of profits X profit)

When we fill in our known numbers, this is the equation. Remember, the profit for the first year was $7000.

Return of investment for the investor = 5000 + (.17 X 7000)

Return of investment for the investor = 5000 + 1190

Return of investment for the investor = $6190