A firm must decide which of three alternatives to adopt to expand its capacity. The firm wishes a minimum annual profit of 20% of the initial cost of each separable increment of investment.. Any money not invested in capacity expansion can be invested elsewhere for an annual yield of 20% of initial cost.

Which alternative should be selected? Use a rate of return analysis.

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Alt. Initial Cost Annual Profit Profit Rate A S100,000 B 300,000 С 500,000 $30,000 66,000 80,000 30% 207 16%