Economic rate of return is defined as:
A) [(C1 + PV1 - PV0 )]/(PV0)
B) [(C1 - (PV1 - PV0 )]/(PV0)
C) [(C1 + PV1)]/(PV0)
D) None of the above

Question

Quizplus · Accepted Answer

Economic rate of return is calculated by dividing the net present value of future cash inflows by the initial investment. Therefore, option A is the correct formula for calculating the economic rate of return. Option B subtracts the initial investment twice, leading to an incorrect result. Option C does not consider the initial investment, also resulting in an incorrect formula.

Economic Rate of Return Is Defined As