Question

35. which variable is not necessary to calculate return on investment? a. after-tax cash flow b....

35. which variable is not necessary to calculate return on investment?

a. after-tax cash flow

b. equity

c. sales price of property

d. downpayment and leverage

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Answer #1

Return on investment is given by = Income from investment / Investment amount

The income from investment, is the after tax cash flow that is obtained from the investment. The investment amount is determined based on the price of the property, how much we pay up front and how much interest we need to pay if a loan is taken.

Thus, the only value we do not need for the calculation of ROI is equity.

Thus, answer - b)

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