Question

If investors have invested $20,000 of common equity in a company and it is determined that the required earnings of the company are $$1,250 each period, then investors must expect to earn what return?

Answer 1

Expected return will be equal to 6.25 %

Step-by-step explanation:

We have given that a investor has invested a amount of = $20000

Required earning of the company = $1250

We have to find the expected return

Expected return is given by

Expected return
`=(return)/(amount\ invested)=(1250)/(20000)=0.0625=6.25` %

So expected return will be equal to 6.25 %