Answer to Question #55793 in Other Economics for Antornette Love

Question #55793
For the following cashflows, the project may have up to? Year Cashflow 0 -$500 1 0 2 0 3 400 4 -50 5 300 a. one RORs b. two RORs c. three RORs d. Four RORs
Expert's answer
The rate of return is always expressed as a percentage and is calculated using the following formula:
ROR = (Net Income / Investment Cost) x 100
In our case maximal net income will be the sum of all cash flows with the 0% discount rate, so the maximal ROR is:
RORmax = (0 + 0 + 400 - 50 + 300)/500 = 650/500 = 1.3, so the right answer is a. one RORs.

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