Calculate expected rate of return for this investment.

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Reference no: EM131057710

A research project would require initial investment of 100,000. There are three possible outcomes for this project:

1) 30% probability that investment yields annual income of 35,000 for six year (starting from year 1 to year six) and zero salvage value

2) 50% probability that investment yields annual income of 25,000 for six year (starting from year 1 to year six) and zero salvage value

3) 20% probability of failure that yields zero annual income but salvage value of 65,000 dollar at the end of year 1

Calculate expected Rate of Return for this investment.

Explain your work in detail including all the required equations and calculations.

Reference no: EM131057710

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