a growing chain is trying to decide which store location to open. the first location (a) requires a $500,000 investment in average assets and is expected to yield annual income of $80,000. the second location (b) requires a $200,000 investment in average assets and is expected to yield annual income of $46,000.

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aamirmajeed5100 aamirmajeed5100 · Answer 1 · 2022-11-20T05:52:17+01:00

The return on investment is 16% for location A and 23% for location B.

A common profitability statistic used to assess how well an investment has done is the return on investment (ROI).

ROI is computed by dividing an investment's net return (or loss) by the investment's initial cost or outlay.

ROI is calculated as (profit – cost) / cost. Your return on investment (ROI) would be 0.9, or 90% if you earned $10,000 from a $1,000 investment.

For location A

= $80,000/ $500,000

=16%

For location B

=$46,000/ $200,000

=23%

As location B is giving a greater return on investment than location A, the company should prefer to invest in B.

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