You will want to invest in a business that requires an initial investment of $5,250. The business is expected to produce cash flows of $750 at the end of Year 1, $1,000 at the end of Year 2, $850 at the end of Year 3, and $6,250 at the end of Year 4. What rate of return would you earn in this business venture?

Recall that rate of return is the net gain or net loss that an investment yield over a given period of time expressed as a percentage of the initial investment cost.

Given that

Initial investment cost = 5250

Total returns or revenue = cash flow (year 1 + year 2 + year 3 + year 4)

= 750 + 1000 + 850 + 6250

= 8850.

Therefore,

rate of returns = (current value - initial value) ÷ initial value

= 8850 - 5250 ÷ 5250

= 3600 ÷ 5250

= 0.6857

= 68.57%

yahayadanjuma55 yahayadanjuma55 · Answer 2 · 2020-04-04T18:08:03+02:00

Answer:

68.57%

Explanation:

Rate of return is a profit on an investment over a given period of time, that is been expressed as a proportion of the original investment

To calculate the return rate, we can use the formula

Return rate = (current/market or sales value - initial cost ÷ initial cost) ×100

We have the following as;

Initial investment cost = 5250

Total returns = cash flow (year 1 + year 2 + year 3 + year 4)

= $750 + $1000 + $850 + $6250

Total return = $8850.

Our Return rate will be

= ($8850 - $5250 ÷ 5250) × 100

= (3600 ÷ 5250)× 100

= 0.6857× 100

Return rate = 68.57%

Our return rate is 68.57%