You invested $1,000,000 today and receive $50,000 at the end of each year for four years. At the end of the fourth year, you liquidate the investment for $1,000,000. Determine the annual ROI for the investment, and prove your answer. You may find the following form helpful:
|
Cash Flow at End of Year |
|||||
|
Year |
Investment Balance at Start of Year |
Total Amount |
Earnings at ?% |
Capital Recovery |
Investment Balance at End of Year |
|
1 |
$1,000,000 |
$50,000 |
|
|
|
|
2 |
|
$50,000 |
|
|
|
|
3 |
|
$50,000 |
|
|
|
|
4 |
|
$1,050,000 |
|
|
$0 |