An investment company owns land now worth $500,000 that is increasing in value each year. If the land value doubles in 7 years, what is the yearly rate of return nearest to? (a) 0.0% (b) 2.0% (c) 7.0% (d) 10.5%

An investment company owns land now worth $500,000 that is increasing in value each year. If the land value doubles in 7 years, what is the yearly rate of return nearest to? (a) 0.0% (b) 2.0% (c) 7.0% (d) 10.5%

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 19E

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Question

An investment company owns land now worth $500,000 that is increasing in value each year. If the land value doubles in 7 years, what is the yearly rate of return nearest to?

(a) 0.0% (b) 2.0% (c) 7.0% (d) 10.5%

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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