Question

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 $80,000. The second location (B) requires a $200,000 investment and is expected to yield annual net income of $40,000.

Compute the return on investment for each Fast & Great Burgers alternative.
  

= Return on Investment Numerator 1 Denominator Net income 11 Average invested assets 80,000 $ 500,000 40,000 $ 200,000 ROI ROI 16% Location A Location B $ $

Answer 1

return on investment numerator / I denominator net income initial investment $ 80,000 7 $ 500,000 $ 40,000 $ 200,000 ROI ROI 16% 20% location A location B

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