Question

Two acquaintances have approached you about investing in business activities in which each is involved. Simone is seeking $575, and Riley needs $680. One year from now, your original investment will be returned, along with $52 income from Simone or $55 income from Riley. You can make only one investment.

Required:
a-1. Compute the ROI of Simone and Riley. (Round your answers to 2 decimal places.) ROI Simone Riley
a-2. Which investment would you prefer? Simone Riley
b. What other factors should you consider before making either investment?

Answer 1

ROI is calculated for both investment opportunities, resulting in negative values for Simone (-90.96%) and Riley (-91.91%), indicating losses. Preferably, neither investment should be chosen. Consider other factors such as business stability, potential growth, comparative opportunities, risk tolerance, and legal implications before making an investment.

Step-by-step explanation:

To calculate the Return on Investment (ROI) for both Simone and Riley's investment opportunities, you would use the formula:

ROI = (Income from Investment - Cost of Investment) / Cost of Investment × 100%

For Simone:

ROI = ($52 - $575) / $575 × 100% = ( - $523) / $575 × 100% ≈ -90.96%

For Riley:

ROI = ($55 - $680) / $680 × 100% = ( - $625) / $680 × 100% ≈ -91.91%

Given the computed ROI values, you would prefer neither investment as both would result in a loss.

Other factors to consider before making an investment could include:

• The financial stability and track record of both businesses
• The potential for long-term growth or additional income from the investments
• Comparative analysis with other investment opportunities
• The level of risk you are willing to accept
• Legal and tax implications of the investment

Answer 2

Step-by-step explanation:

For Simone:

Funds needed = $575

Additional income after a year = $52

Total returns (ROI) = $627 or +11.81 %

For Riley:

Funds needed = $680

Additional income after a year = $55

Total returns (ROI) = $735 or +7.48%

Simone's investment is better preferred because it has a higher ROI of 11.81 % which is about 4 % greater than Riley'.

Other factors to consider is the associated risk in each investment, and their growth potential.