A firm has an average investment of $10,000 during the year.During the same time,the firm generates after-tax income of $2,000.
If the cost of capital is 15%,what is the net return on the investment?
A)5%
B)20%
C)15%
D)10%

Question

Quizplus · Accepted Answer

The net return on the investment is the after-tax income divided by the average investment, minus the cost of capital. In this case, the net return on the investment is (2,000 / 10,000) - 0.15 = 0.05, or 5%.

A Firm Has an Average Investment of $10,000 During the Year.During