Question

Amigo Mobility, which manufactures battery-powered mobility scooters, has $665,000 to invest. The company is considering three different battery projects that will yield the following rates of return: Deep cycle = 15% Wet/flooded = 37% Lithium ion = 20% The initial investment required for each project is $165,000, $100,000, and $400,000, respectively. If Amigo’s invests in all three projects, what will be its overall rate of return?

Answer 1

Solution:

Given that,

The following rates of return:

Deep cycle = 15%

Wet/flooded = 37%

Lithium ion = 20%

The initial investment required for each project is $165,000, $100,000, and $400,000, respectively

The rate of return is

= (165000 / 665000) * 15% + ( 100000 / 665000 ) * 37% + ( 400000 / 665000) * 20%

= 3.7218 + 5.5639 + 12.0301

= 21.3158