Project Selection – Return on Investment

Definition

Return on investment (ROI) is the benefit an investment bring about, by comparing profits in relation to capital invested.

Sample Question

An organization is considering several projects with the following ROIs:

• ROI of Project A = 1.1
• ROI of Project B = 0.4
• ROI of Project C = 1.8
• ROI of Project D = 1.0

Based on this information, which is the best project to undertake?

A. Project A
B. Project B
C. Project C
D. Project D

Solution: C

Higher the better

The higher the ROI, the more favorable the project financially is to the organization.

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