Question

Return on Investment Analysis. A growing chain is deciding on store locations. Calculate the expected return on investment for each location and determine which location (A or B) the company should open based on return on investment.

A) Location A: 15%, Location B: 23%; Open Location A
B) Location A: 15%, Location B: 23%; Open Location B
C) Location A: 9.2%, Location B: 23%; Open Location A
D) Location A: 9.2%, Location B: 23%; Open Location B

Answer 1

Location B is the preferred choice for opening a new store based on Return on Investment (ROI), yielding a higher expected ROI of 23% compared to Location A's 15% or 9.2%. The options (A) and (C) are correct.

Step-by-step explanation:

When deciding between two potential store locations based on Return on Investment (ROI), the location with the higher ROI is typically the better choice, assuming all other factors are equal. Thus, among the given options, Location A yields a 15% return, and Location B yields a 23% return. Based on ROI analysis alone, opening Location B would be preferable due to its higher expected ROI.

Moreover, if we consider the Huff Model or Economic Base Analysis in decision-making, these tools could further inform the potential success of the location by analyzing customer behavior patterns or the economic impact of the industry within the area, respectively. However, for the details provided in the question, the assessment is straightforward: Location B, with a 23% expected ROI, exceeds the return that would be generated by Location A, regardless of whether Location A's ROI is 15% or 9.2%. Therefore, options (A) and (C) are correct.