Asked by Charlie Giles on Jun 25, 2024
Verified
Suppose a firm anticipates that an R&D expenditure of $100 million will result in a new production process that will reduce costs and thus create a one-time added profit of $112 million a year later.The firm's expected rate of return is:
A) 0.12 percent.
B) 112 percent.
C) 12 percent.
D) 2 percent.
Expected Rate of Return
The expected return on an investment, based on the potential outcomes and their probabilities.
Production Process
The steps and methods involved in the creation of goods and services, from the procurement of raw materials to the final product.
Added Profit
Additional earnings generated from an action or operation beyond the original or expected profit.
- Master the core concepts of optimizing investment in research and development within corporations.
Verified Answer
GC
Geetanjali ChughJun 29, 2024
Final Answer :
C
Explanation :
The expected rate of return is calculated by dividing the profit by the initial investment and then multiplying by 100 to get a percentage. Here, ($112 million - $100 million) / $100 million * 100 = 12%.
Learning Objectives
- Master the core concepts of optimizing investment in research and development within corporations.
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