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The question is:

A merchant buys an old carpet for $25 dollars.He spends 15 dollars to have it returned to to good condition and then sells it for 50 dollars . What is percent profit of his total investment ?

The answer is 20% and i get 40% . What am i doing wrong ?

Here is how i solved it:

Buying price = $25

Selling price = 50

Profit = 25 - 15 = 10

%change = (Diff/Orig) x 100 = (10/25) x 100 = 40%

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The sale price is $\$50$, his total investment was $\$40$. Thus his profit is $\$10$. That looks to me like a $25\%$ return on his investment $(10/40)$; alternatively, $20\%$ of the sale price was profit $(10/50)$. –  in_wolfram_we_trust Jun 14 '12 at 13:31
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1 Answer

up vote 4 down vote accepted

I would have said that he made a $25$% profit: he spent $\$40$ and got back $\$50$, for a profit of $\$10$, so his profit is $\frac{10}{40}=\frac14$, or $25$%, of his investment. The only way that I can see to get a profit of $20$% is to figure profit on the basis of the selling price: his profit is $\frac{10}{50}=\frac15$, or $20$%, of his selling price.

Your basic error is not realizing that you have to count all of his costs together: the effective cost to him of the saleable rug was $\$25+\$15=\$40$.

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Thanks for pointing that out –  Rajeshwar Jun 14 '12 at 14:26
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