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

30%

Step-by-step 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}* 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%