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

Answer:

Expected return will be equal to 6.25 %

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 $=\frac{return}{amount\ invested}=\frac{1250}{20000}=0.0625=6.25$ %

So expected return will be equal to 6.25 %