Exercise 9-9 Investment center analysis LO A1 You must prepare a return on inves

Question

Exercise 9-9 Investment center analysis LO A1 You must prepare a return on investment analysis for the regional manager of Fast& Great Burgers. This growing chain is trying to decide which outlet of two alternatives to open. The first location (A) requires a $500,000 investment and is expected to yield annual net income of $75,000. The second location (B) requires a $200,000 investment and is expected to yield annual net income of $46,000. Compute the return on investment for each Fast & Great Burgers alternative. Return on Investment Numerator Denominator ROI ROI Location A Location B Using return on investment as your only criterion, recommend which of the locations to open. O Location A Location B Reference links

Explanation / Answer

Compute ROI :

Recommend Location B to open

Return on investment Numerator / denominator = Return on investment Net income / Investment = ROI Location A 75000 / 500000 = 15% Location B 46000 / 200000 = 23%

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