Sarah invests Rs 8,50,000 in a project. She gets Rs 1,75,000, Rs 5,00,000 and Rs 2,00,000 as revenues on the project. What is the interest rate of return of the project?
Question
Sarah invests Rs 8,50,000 in a project. She gets Rs 1,75,000, Rs 5,00,000 and Rs 2,00,000 as revenues on the project. What is the interest rate of return of the project?
Solution
To calculate the rate of return, we first need to determine the total revenue and then subtract the initial investment.
Step 1: Calculate total revenue Sarah's total revenue from the project is Rs 1,75,000 + Rs 5,00,000 + Rs 2,00,000 = Rs 8,75,000.
Step 2: Calculate net profit The net profit is the total revenue minus the initial investment. So, Sarah's net profit is Rs 8,75,000 - Rs 8,50,000 = Rs 25,000.
Step 3: Calculate rate of return The rate of return is the net profit divided by the initial investment, multiplied by 100 to get a percentage. So, Sarah's rate of return is (Rs 25,000 / Rs 8,50,000) * 100 = 2.94%.
So, the interest rate of return on the project is 2.94%.
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