Question

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? . A.) 50%. B.) 40%. C.) 30%.

Answer 1

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: Out of all the options shown above the one that best represents the annualized ROI is answer choice C) 30%. To solve this you first need to determine the data that will be needed to solve it. In this case the initial investment which is 10,000, the total profit: 25,000, and finally the total number of years: 5. Then we simply use the following formula: Return on Investment = (Gain from Investment - Cost of Investment)/ cost of investment. You then multiply the result by 100% and finally divide by the number of years which in this case is 5.

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Answer 2

Well, . . .
Company's profit : 25,000 - 10,000
                       
                            = 15,000

15,000/10,000 x 100% = 150 %

Since they made it in 5 years period, the annualized ROI would be :
150% / 5 = 30 %

The answer is option C

hope this helps