 |
|
|
|
|
|
|
ROI > RRoR
Where:
Return on investment (ROI) is revenues or payback less initial cost
Required rate of return (RRoR) is the interest rate
or the minimum expected return for typical investment
In this case, given that:
Payback = 1,200,000
Initial cost = 1,000,000
And RRoR = 9%
Therefore:
ROI = (1,200,000-1,000,000)/1,000,000
= 200,000/1,000,000 = 20%
And 20% > 9% (or 20% is greater than 9%)
Since the ROI of 20% is greater than the RRoR of 9%, this is a good
investment and should be seriously considered.
|
 |
 |
 |
 |
