Return on Investment and Return of Investment John invested $250,000 into a business that earned a profit of 2,250 during the past month as shown below. John believes the business will earn an annual profit equal to twelve times the monthly profit. Assume John wants to take $20,000 from the business each year for his personal use.
|
Resources created from sales |
$17,000 |
|
Resources consumed: |
|
|
Materials |
$7,500 |
|
Insurance |
1,500 |
|
Rent |
2,000 |
|
Utilities |
950 |
|
Wages |
2,800 |
|
Total cost of resources consumed |
14,750 |
|
Profit earned |
$2,250 |
Required
A. Determine the company’s return on investment.
B. Determine John’s return of investment.