Amigo Mobility which manufactures batterypowered mobility sc

Amigo Mobility, which manufactures battery-powered mobility scooters, has $660,000 to invest. The company is considering three different battery projects that will yield the following rates of return:

Deep cycle = 25%
Wet/flooded = 36%
Lithium ion = 20%

The initial investment required for each project is $160,000, $100,000, and $400,000, respectively. If Amigo’s invests in all three projects, what will be its overall rate of return?

Solution

Proportion of Budget invested in Deep Cycle = $160,000/$660,000 = 0.2424

Proportion of Budget invested in Wet/Flooded = $100,000/$660,000 = 0.1515

Proportion of Budget invested in Lithium Ion = $400,000/$660,000 = 0.6061

Overall return = 25% x 0.2424 + 36% x 0.1515 + 20% x 0.6061 = 0.0606 + 0.0545 + 0.1212 = 0.2363

= 23.63%