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What is expected return on investment?
Expected return on investment (ROI) is a metric used to estimate the potential profitability of an investment, expressed as a percentage. It is calculated by taking the difference between the expected gains and the initial investment cost, divided by the initial investment cost. This figure helps investors assess the attractiveness of different investment opportunities and make informed decisions based on their risk tolerance and investment goals. Generally, a higher expected ROI indicates a more favorable investment.
What is the expected rate of return on investment for this opportunity?
The expected rate of return on investment for this opportunity is the anticipated percentage increase in value or profit that an investor can expect to receive from their investment.
Difference between marginal efficiency of investment and marginal efficicency of capital?
MEC is the expected rate of return on capital and MEI is the expected rate of return on investment.
Basic determinants of investment?
The immediate determinants of investment are: (a) the expected rate of return and (b) the real rate of interest.
What is the interest rate at which the sum of PVs of the expected cash inflows or receipts is equal to the total PV of the investment outlay?
The interest rate at which the sum of the present values (PVs) of expected cash inflows equals the total PV of the investment outlay is known as the internal rate of return (IRR). This rate is a critical metric in capital budgeting and investment analysis, as it represents the expected annualized return on an investment. When the IRR exceeds the cost of capital, the investment is considered favorable. Conversely, if the IRR is less than the cost of capital, the investment may not be worth pursuing.
What is the difference between the required rate of return and the expected rate of return in investment analysis?
The required rate of return is the minimum return an investor needs to justify the risk of an investment, while the expected rate of return is the return that an investor anticipates receiving based on their analysis of the investment's potential performance.
What would happen to the amount of economic investment made today if firms expected the future returns to such investment to be very low?
1. What if firms expected future returns to be very high?
What is the expected rate of return on an investment when you are informed that the price of this investment is actually 3.000.000?
The rate of return (ROI) of an investment depends on many factors including: other costs relating to the use or production of the investment, duration of time held, income produced by the investment, etc.
Payback period concept is best explained by what?
Payback period is the time in which the initial cash outflow of an investment is expected to be recovered from the cash inflows generated by the investment. It is one of the simplest investment appraisal techniques.
How do you calculate r-r ratio?
The R-R ratio, often used in finance, is calculated by dividing the risk premium of an investment by its expected return. First, determine the risk-free rate (such as the yield on government bonds) and the expected return of the investment. Subtract the risk-free rate from the expected return to find the risk premium. Finally, divide the risk premium by the expected return to obtain the R-R ratio.
How can I calculate the expected return on an investment?
To calculate the return on an investment you will fist write down the amount of your total investment including fees and any expenses. Next, write down your loss and finally calculate the return on investment by dividing the profit by total investment. www.moneychimp.com offers a compound interest calculator for your convenience.
How can one determine the expected rate of return for an investment?
To determine the expected rate of return for an investment, one can calculate the average annual return based on historical data, analyze the current market conditions and economic outlook, consider the risk associated with the investment, and use financial models such as the Capital Asset Pricing Model (CAPM) or the Dividend Discount Model (DDM).
