To solve this problem, we need to determine the return on investment (ROI) for the first year of business. The ROI is calculated using the following formula:
[tex]\[ \text{ROI} = \left( \frac{\text{Net Profit}}{\text{Start-up Costs}} \right) \times 100 \][/tex]
Firstly, we need to calculate the Net Profit. The Net Profit can be determined by subtracting the total expenses and income taxes from the gross sales.
Given:
- Start-up costs: $60,800
- Gross sales: $65,800
- Total expenses: $28,500
- Income taxes: $6,370
The Net Profit is calculated as follows:
[tex]\[ \text{Net Profit} = \text{Gross Sales} - \text{Total Expenses} - \text{Income Taxes} \][/tex]
Substitute the values into the formula:
[tex]\[ \text{Net Profit} = 65,800 - 28,500 - 6,370 \][/tex]
[tex]\[ \text{Net Profit} = 30,930 \][/tex]
Next, we calculate the ROI by substituting the Net Profit and Start-up Costs into the ROI formula:
[tex]\[ \text{ROI} = \left( \frac{30,930}{60,800} \right) \times 100 \][/tex]
This simplifies to:
[tex]\[ \text{ROI} \approx 50.871710526315795 \][/tex]
Hence, when rounded to the nearest whole number, the ROI is approximately 51%.
Therefore, the correct answer is:
OB. 51%
