ITPEC FE Morning April 2020 Question 79
ITPEC FE Morning April 2020 — Question 79 of 80
ROI (Return on Investment) — calculate profit as a percentage of initial cost.
Formula: ROI = (Gain − Cost) / Cost × 100%
- •Purchase price: $500,000
- •Sale price: $1,000,000
- •Profit:
$1,000,000 − $500,000 = $500,000 - •ROI:
$500,000 / $500,000 × 100% = 100%
Why not others:
- (a) 50 — would imply profit of $250,000, not the case here
- (c) 150 — no formula produces this result from the given numbers
- (d) 200 — confuses total return ratio (sale/cost = 200%) with ROI, which measures profit relative to cost
Key rule: ROI = (Profit / Investment) × 100%. Use profit (gain minus cost), not total sale price.
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