A growing chain is trying to decide which store location to open. The first location (A) requires a $500,000 investment in average assets and is expected to yield annual income of $70,000. The second location (B) requires a $200,000 investment in average assets and is expected to yield annual income of $46,000.

 A growing chain is trying to decide which store location to open. The first location (A) requires a $500,000 investment in average assets and is expected to yield annual income of $70,000. The second location (B) requires a $200,000 investment in average assets and is expected to yield annual income of $46,000.

(1) Compute the expected return on investment for each location.

(2) Using return on investment, which location (A or B) should the company open?

 

Explanation
2.
Open the B Location. B is preferred because its return on investment (assets) of 23% is better than the 14% at the A Location.

Thanks