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 $1,000,000 investment and is expected to yield annual net income of $160,000. The second location (B) requires a $600,000 investment and is expected to yield annual net income of $108,000. Compute the return on investment for each Fast & Great Burgers

Answer 1

Compute the return on investment for each Fast & Great Burgers

The second location (B) : 18%

Step-by-step explanation:

The return on investment is a financial ratio that let the investor know how much the investor will receive in relation to their investment.

One of the most used Return on Investment formula indicates:

ROI: Net Income / Cost of investment

In this case:

Project A)

Annual Net Income $160,000

Investment: $1,000,000

ROI : $160,000/$1,000,000 = 16%

Project B)

Annual Net Income $108,000

Investment: $600,000

ROI : $108,000/$600,000 = 18%