Certified Business Analysis Professional (CBAP) — Question 37

A company has a process improvement initiative that is projected to increase revenue by $150,000 USD non-compounded per year. The budgeted cost of the initiative is $200.000 and supporting the initiative will cost $30.000 for years two and three.
What is the projected return on investment over the first 3 years?

Answer options

• A. 44%
• B. 73%
• C. 40%
• D. 51%

Correct answer: B

Explanation

The projected revenue over three years amounts to $450,000 ($150,000 per year), while the total costs are $260,000 ($200,000 initial cost plus $60,000 for the two subsequent years). The return on investment is calculated as (Total Revenue - Total Costs) / Total Costs, which results in a 73% ROI, making option B the correct answer. The other options are incorrect as they do not accurately reflect this calculation.