A company is looking to see what rate of return it is receiving from a project when the project's initial investment is $14 million today and will receive $18.5 million in four years.
A)7.22 per cent
B)32.14 per cent
C)19.8 per cent
D)6.2 per cent

Question

Quizplus · Accepted Answer

The rate of return can be calculated using the formula for the compound annual growth rate (CAGR), which is [(Ending Value/Beginning Value)^(1/Number of Years)] - 1. Plugging in the values: [(18.5 million / 14 million)^(1/4)] - 1 = 0.0722 or 7.22%.

A Company Is Looking to See What Rate of Return