A firm decides to make a $20 million expenditure on research and development that will create a new product. This product is expected to generate a one-time increase in the firm's revenues by a total of $40 million a year later. The firm also estimates that the production cost of the new product will be $18 million, also realized one year after the initial R&D expenditure. What is the expected rate of return on this research and development expenditure?
A)5 percent
B)11.1 percent
C)10 percent
D)20 percent

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The Answer of A firm decides to make a $20 million expenditure on research and development that will create a new product. This product is expected to generate a one-time increase in the firm's revenues by a total of $40 million a year later. The firm also estimates that the production cost of the new product will be $18 million, also realized one year after the initial R&D expenditure. What is the expected rate of return on this research and development expenditure?
A)5 percent
B)11.1 percent
C)10 percent
D)20 percent

A Firm Decides to Make a $20 Million Expenditure on Research