The correct answer is option (B):
0.25
Let's break down this profit calculation. The problem states that the profit is 20% *on the selling price*. This is key. We need to find the profit percentage relative to the *cost price*.
Here's how to solve it:
1. Assume a Selling Price: Let's assume the selling price is $100 for easy calculation.
2. Calculate the Profit: The profit is 20% of the selling price, so profit = 0.20 * $100 = $20.
3. Calculate the Cost Price: The cost price is the selling price minus the profit. Cost price = $100 - $20 = $80.
4. Calculate the Profit Percentage (relative to cost price): Profit percentage = (Profit / Cost Price) * 100. So, Profit percentage = ($20 / $80) * 100 = 25%.
Therefore, the actual profit percentage is 25%. This is why the correct answer is 0.25 (which represents 25% in decimal form). We are looking for the percentage relative to the initial investment, not the sale price.