instead of calculating a project is net present value, companies often prefer to ask whether the project is return is higher or lower than the opportunity cost of capital. for example, think back to the original proposal to build the office block. you planned to invest 350,000 to get back a cash flow of c1 = 400,000 in 1 year. therefore, you forecasted a profit on the venture of $400,000 -350,000 = $50,000 and a rate of return of
rate of return = profit/investment = C1- invesment/ investment