Using the data in Extract B, calculate the average rate of return from purchasing a pair of glasses - Edexcel - A-Level Business - Question 1 - 2019 - Paper 2

The total return is calculated by multiplying the estimated increased earnings per person per year by the expected life of the glasses:

$$\text{Total Return} = \text{Estimated Increased Earnings} \times \text{Expected Life} = £108 \times 2 = £216$$

The average annual return can be computed by dividing the total return by the expected life:

$$\text{Average Annual Return} = \frac{\text{Total Return}}{\text{Expected Life}} = \frac{£216}{2} = £108$$

Now substituting the values into the ARR formula:

$$ARR = \frac{£108}{£4} \times 100 = 2700\%$$

This indicates that the purchase of a pair of VisionSpring glasses yields a very high average rate of return.