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 $70,000. The second location (B) requires a $200,000 investment and is expected to yield annual net income of $44,000.

Answer 1

14% and 22%

Step-by-step explanation:

The formula to compute the return on investment is shown below:

Return on investment = Net income ÷ Investment

The preparation of the return on investment analysis is shown below:

Fast & Great Burgers

Return on investment analysis

Numerator ÷ Denominator = Return on investment

Location A $70,000 ÷ $500,000 = 14%

Location B $44,000 ÷ $200,000 = 22%