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You expect that a project will bring in $25,000 USD in revenue per year. You estimate it will cost $12,000 up front. You also estimate costs of $200 per month for the first 12 months, which equals $2,400 per year. Using the formula (G-C) ÷ C = ROI, how would you calculate the project’s return on investment (ROI) after the first 12 months?1 point(25,000 - 12,000) ÷ 14,400 = 90%(25,000 - 14,400) ÷ 14,400 = 74%(25,000 - 12,000) ÷ 14,400 = 108%(25,000 - 12,000) ÷ 12,000 = 88%

Question

You expect that a project will bring in 25,000USDinrevenueperyear.Youestimateitwillcost25,000 USD in revenue per year. You estimate it will cost 12,000 up front. You also estimate costs of 200permonthforthefirst12months,whichequals200 per month for the first 12 months, which equals 2,400 per year. Using the formula (G-C) ÷ C = ROI, how would you calculate the project’s return on investment (ROI) after the first 12 months?1 point(25,000 - 12,000) ÷ 14,400 = 90%(25,000 - 14,400) ÷ 14,400 = 74%(25,000 - 12,000) ÷ 14,400 = 108%(25,000 - 12,000) ÷ 12,000 = 88%

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Solution

To calculate the project's return on investment (ROI) after the first 12 months, you need to subtract the total costs from the total revenue and then divide by the total costs.

First, calculate the total costs. The upfront cost is 12,000andthemonthlycostsforthefirst12monthstotalto12,000 and the monthly costs for the first 12 months total to 2,400 (200permonth∗12months).So,thetotalcost(C)is200 per month * 12 months). So, the total cost (C) is 12,000 + 2,400=2,400 = 14,400.

The total revenue (G) is $25,000.

Now, plug these values into the formula (G-C) ÷ C = ROI:

(25,000−25,000 - 14,400) ÷ $14,400 = 0.7361

To convert this to a percentage, multiply by 100:

0.7361 * 100 = 73.61%

So, the project's ROI after the first 12 months is approximately 74%. Therefore, the correct answer is (25,000 - 14,400) ÷ 14,400 = 74%.

This problem has been solved

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