You are using ROI to evaluate a project that requires investments of $500 in each of the first 3 years, and yields annual income of $100, $50, and $25 in each of the first 3 years. What would happen to ROI if the annual incomes double?

Question

Business

Uriah Rasmussen

9 August, 04:19

You are using ROI to evaluate a project that requires investments of $500 in each of the first 3 years, and yields annual income of $100, $50, and $25 in each of the first 3 years. What would happen to ROI if the annual incomes double?

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Answers (1)

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Rebecca Schaefer · Answer 1

ROI doubles

Explanation:

The formula to compute the return on investment is shown below:

Return on investment = (Annual income) : (Initial investment)

If we take the first case,

Annual income = $100

And, the investment = $500

So, the ROI = $100 : $500 = 0.2

If the annual income doubles i. e $200

So, the ROI = $200 : $500 = 0.4

So in the given case, the ROI also doubles