Fundamental Accounting Principles 22th Edition by John Wild ,Ken Shaw,Barbara Chiappetta

Exercise 73

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 alternative and then make your recommendation in a half-page memorandum to the regional manager. (The chain currently generates an 18% return on total assets.)