K Question 1 (of 5) value: 2.00 points You must prepare a return on investment a
ID: 2431166 • Letter: K
Question
K Question 1 (of 5) value: 2.00 points 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 average investment and is expected to yield annual net income of $65,000. The second location (B) requires a $200,000 average 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 Denominator ROI ROI tion A Location B
Explanation / Answer
Return on Investment for each location for Fast and Great Burgers
Return on investment
Numerator
/
Denominator
=
Return on investment
/
=
ROI
Location A
$ 65000
/
$ 5,00,000
=
13%
Location B
$ 40,000
/
$ 2,00,000
=
20%
Working Note:
Return on Investment(By Net Income Method)=Net Income/Average Investment*100
Return on investment
Numerator
/
Denominator
=
Return on investment
/
=
ROI
Location A
$ 65000
/
$ 5,00,000
=
13%
Location B
$ 40,000
/
$ 2,00,000
=
20%
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